Malaysia’s Kenanga Investors is in an advanced stage of negotiations to acquire i-VCAP Management, a state-backed asset and exchange-traded fund manager, according to people familiar with the matter.
“The deal, if sealed, would position Kenanga Investors as the second largest ETF provider in Malaysia, and it would also allow i-VCAP’s ultimate shareholders to exit the business as announced over a year ago,” one of these people tells Asia Asset Management.
Affin Hwang Asset Management is currently the market leader with nine of the 19 ETFs listed on the local stock exchange. i-VCAP manages four ETFs and Kenanga Investors has two.
i-VCAP is wholly-owned by Valuecap Group, a company equally owned by sovereign wealth fund Khazanah Nasional, Permodalan Nasional, Malaysia’s largest fund manager, and civil service pension fund Kumpulan Wang Persaraan.
Valuecap announced its plan to exit the fund management business in December 2019. Apart from i-VCAP, Valuecap owns VCAP Asset Managers, which manages wholesale funds, primarily for its parent company’s three shareholders.
i-VCAP and VCAP Asset Managers had around 3 billion ringgit (US$738 million) of combined assets under management.
“Valuecap is exploring various strategic options with regard to VCAM and i-VCAP, including divesting or winding up the companies,” the company said in a statement on December 19, 2019.
It didn’t provide a reason. But people familiar with the matter say it may be largely because the three shareholders had decided to exit the company.
The decision came after Malaysia’s previous administration led by then Prime Minister Mahathir Mohamad began to review investments of government-linked companies such as Khazanah and Permodalan Nasional after unexpectedly winning the 2018 general election. Mahathir’s coalition government collapsed in February 2020 after one of its component parties pulled out.
Valuecap’s government-owned shareholders are believed to hold a significant chunk of i-VCAP’s ETFs. It’s unclear whether they will hold or sell off the funds if Kenanga Investors acquires i-VCAP.
i-VCAP’s main ETF is the MYETF Dow Jones Islamic Malaysia Titan 25 product launched in 2008. It’s one of the world’s largest shariah ETFs, with around $90 million of assets under management.
“I believe this is one of the items the stakeholders are discussing,” one of the people familiar with the matter says.
Kenanga Investors had 12.6 billion ringgit of assets under management as of end-September 2020.