Global sell-off offers chance to buy, says KWAP CEO

(Sept 21): Malaysia’s state pension fund aims to increase its overseas investments as it views this year’s turbulence in financial markets as an opportunity to buy.

Retirement Fund Inc, or KWAP, plans to increase the proportion of foreign investments in its portfolio to 30% by 2025 from 20% at present, chief executive officer Nik Amlizan Mohamed said in a Bloomberg TV interview on Tuesday (Sept 20). The pension fund for civil servants held RM159 billion in assets at the end of 2021.

“We must embrace volatility and view the current weakness as an opportunity for us to enter new investments at attractive valuations,” she said. “We are, after all, in the business of taking measured and calculated risks.”

Stocks and bonds have been roiled this year, as soaring inflation forces global central banks to tighten at a time when slowing economic growth was already denting the outlook for risk assets. KWAP intends to double the portion of its investments in the private market, which includes property and infrastructure, to 20% by 2025, amid the heightened volatility seen in public markets.

“If we look at comparing volatility versus the expected return, our intention is to diversify further into the private market, locally and globally,” Nik Amlizan said.

The plans to increase investments abroad and in the private market space are aimed at helping KWAP meet its goal of raising its annual return to 7% in three years, after clocking 6% a year for the past decade, she said. Eking out returns in today’s world of higher interest rates is going to be challenging.

“The low-interest rate environment that existed for the past decade is no longer there,” she said. “We have to adjust the assumptions we’ve used in our models to take in the ‘new normal’, and be nimble.”