The managing director of Khazanah has commented that increased rates will put pressure on corporates, notably those that are either consumer-oriented or highly leveraged. He also noted that the necessity to cut costs could create opportunities in the realm of private equity for businesses.
Khazanah Nasional, Malaysia's sovereign wealth fund, is in the process of rebalancing its investment portfolio to make it more resilient to market volatility, according to its managing director, Amirul Feisal Wan Zahir. The fund reported that its net asset value had experienced a 5% drop in 2022 from the previous year, impacted by an overall downtrend in the global market. Around half of the portfolio is held in public markets. Amirul stated in an interview at the Energy Asia conference in Kuala Lumpur on Monday that Khazanah is focused on making its portfolio more resilient to the market. The fund enjoyed a 1.6 billion ringgit ($343 million) net profit in 2022, rising sharply from the previous year and four successive annual net profits following a significant decline in 2018. This is in stark contrast to the 18% fall of the MSCI World index and the 20% drop of the MSCI Emerging Markets index in the same period.
At the end of 2022, Khazanah reported that 55.9% of its portfolio was invested in public markets in Malaysia, with 13.4% situated in public markets outside the country. Its portfolio was composed of 24% in private markets, with more than half of this having been allocated to external investments, and 8% dedicated to real assets. Commenting on the situation, Amirul Feisal noted the possibilities of deploying more assets. He noted that industrial consolidation and the rise of interest rates could lead to pressure for companies with consumer-oriented or highly leveraged businesses.
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In spite of central banks' attempts to pull back from the excessively loose monetary policies implemented after the 2008-2009 financial crisis, inflation rates remain unremittingly high. This combo of rate increases and surging yields is making life hard for many businesses. Amirul Feisal remarked that this has encouraged them to examine how they can bring down costs. He then asserted that such investigation can open up opportunities in the private equity sector, particularly in the domain of business services.
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