KWAP chief flags concerns, mulls QFII application

In May, Wan Kamaruzaman* took over as chief executive of KWAP, a Malaysian state pension fund with around $30 billion in assets under management. He was previously head of treasury at the $170 billion Employees Provident Fund.

What do you see as the main risks to your portfolio at present?
Until recently, it was the uncertainty of the general election [in Malaysia, which took place in May]. But now that’s over, we’re very happy we can focus on investment opportunities. A lot of things have been deferred or postponed because of [the election], especially IPOs and bond issues, so we hope there’s no more domestic political uncertainty.

How about your international concerns?
The withdrawal of quantitative easing by the US Federal Reserve will have a big impact on global equity and fixed income valuations. The severity of that is yet to be seen, but it will be have a large effect.

Then there are Indonesian general elections coming up next year, and political uncertainties elsewhere in Asia and in the Middle East are also concerns. For example, the events in Egypt will probably have some impact on the global sukuk [Islamic bond] market – and we are trying to put more money into that asset class.

Where do you see the biggest investment opportunities now?
Looking at the big picture in terms of asset classes, we feel that probably the safest is global real estate – but this is a very small portion of our asset allocation. However, if we get our revised asset allocation approved this year, we will probably further increase our global property exposure.

At moment we don’t have exposure to Japan – fortunately or unfortunately, depending on how you look at it. But as we move more into foreign assets, we will look at the more developed markets, and that will probably also include Japan.

What exposure do you have directly to Chinese securities?
We have Hong Kong-listed Chinese shares, which are not performing so well due to the recent corrections. But if there are further corrections, it will be an opportune time to buy more. We don’t have any CNH [Hong Kong-issued renminbi-denominated] bond exposure at this point.

So you presumably don’t have a QFII licence?
No, but we are exploring the possibility of applying for a QFII [qualified foreign institutional investor] licence. As a sovereign fund, we’d probably get priority from China.

* An extended interview with Wan Kamaruzaman will appear in the September issue of AsianInvestor magazine, covering KWAP's portfolio management approach.