KUALA LUMPUR - Malaysia's sovereign wealth fund Khazanah Nasional announced its first pre-tax loss in a decade amounting to RM6.27 billion (S$2 billion) in its annual review presentation on Tuesday (March 5).
The company pinned last year's losses on global market challenges, with half of its impairments due to Malaysia Airlines, the national carrier it owns.
Its new managing director Shahril Ridza Ridzuan said the fund had to contend with short-term losses in order to actualise long-term gains it projects to achieve within five years.
"2018 was a very difficult year for markets, globally not just Malaysia," Datuk Shahril told reporters during the briefing.
"Key thing to focus on is restructuring our portfolio to look at long-term returns ... based on a five-year rolling basis. You'll have fluctuations. You're going to have years like 2018 where market severely under-performed, there's a dip and years like 2017 where markets grew really well," he added.
Khazanah declared RM1.5 billion dividends to the government, up from the 2017 dividends of RM1 billion announced before last May's general election.
The fund practises a conservative accounting of its profit and loss statement, which explains its first pre-tax loss in a decade due to market depreciation of some assets.
Mr Shahril said the fund has profitable assets too, but those are not realised "until we dispose of it".
Mr Shahril was hired to run Khazanah after Pakatan Harapan took power last year, having previously led Malaysia's pension fund.
Under the new leadership, Khazanah's refreshed mandate includes a relook at its investments and diversification of portfolio across geographies and sectors globally. Three-quarters of the fund's investments are with Malaysian companies.
"With portfolio re-balancing (what) we're doing is to take out the imbalances. For instance we have large concentration risks, driven by the fact that in Malaysia at least, a big chunk of our assets is tied up in just a few companies," Mr Shahril said.
Khazanah's underperforming companies last year were Malaysia Airlines and telecommunications network Telekom Malaysia (TM). The high impairment stemming from the airline was due to the carrier's inability to meet its objectives, with Khazanah adjusting the carrier's book value. The airline is conducting a review of its current strategy.
Khazanah recorded an impairment of RM7.3 billion for 2018, RM5 billion more than 2017's figure.
TM meanwhile suffered losses from the government announcement last year to reduce internet costs for consumers. Communications and Multimedia Minister Gobind Singh Deo had instructed telcos to lower broadband prices, as part of the ruling pact's promise to slash prices and increase broadband speed.
"You'll see fluctuations due to regulatory changes… Most important for regulators is to make sure you have a regime where while safeguarding consumer public interests, you have to also make sure there's enough incentive (for investors) to invest in the industry and get a profitable return," said Mr Shahril.
Khazanah is placed 25th worldwide in terms of asset size on the sovereign wealth fund rankings published by the Sovereign Wealth Fund Institute.