DEFINITION of Khazanah Nasional Berhad
Khazanah Nasional Berhad, incorporated in 1993, is a government-owned investment organization that manages the sovereign wealth fund for the Government of Malaysia. The sole shareholder is the Malaysian Ministry of Finance. Khazanah had approximately RM91 billion in Realizable Asset Value (RAV) under management in 2009. By the end of 2017, the figure had grown to just over RM157 billion. Khazanah follows stringent corporate governance and risk management practices of the country, submitting to regular external audits and providing material financial disclosures to the public.
BREAKING DOWN Khazanah Nasional Berhad
Khazanah Nasional Berhad is governed by a 12-member Board of Directors with members from both the public and private sectors. The board oversees the senior management group, composed of over 20 investment professionals. The goal of Khazanah is to promote economic growth in Malaysia and make strategic investments on behalf of the Malaysian government. Part of Khazanah's overall mission is to help "transform Government-Linked Companies (GLCs) into becoming high-performing and commercially-driven entities." The fund's 100+ investments are spread across many business sectors, with aviation, financial services, utilities and telecommunications leading the way. The portfolio is geographically focused on firms operating in Malaysia and Southeast Asia. In terms of RAV, Malaysian companies comprised over 55% of total wealth fund value as of December 2017 and Singaporean companies around 12%.
Khazanah steered the sovereign wealth fund to a 10% compound annual growth rate (CAGR) from the end of 2009 to 2017, as implied by the published figures of the organization. This performance far outpaced the 4.4% CAGR of the main Malaysian stock market index over the same period. However, since the wealth fund contains some private investments for which the investment management team must conduct its own valuations, the value of the fund at any given measurement period is subject to some variance from true underlying value. Even if some private assets were overvalued, the performance of Khazanah relative to the country's stock market index for that period was impressive.