KUALA LUMPUR • Malaysian sovereign wealth fund Khazanah Nasional will unveil a plan this month to deliver more cash to the government by pruning its stakes in non-strategic assets and dialling back its offshore presence, sources have told Reuters.
This underlines the urgent need for Prime Minister Mahathir Mohamad to raise money for government coffers, depleted by a fiscal deficit and a massive debt from a multibillion-dollar scandal at state fund 1Malaysia Development Berhad.
Under the new strategy, set to be announced at Khazanah's annual review on Feb 28, the US$39 billion (S$53 billion) fund will look to trim stakes in some companies identified as non-strategic to 15 per cent to 25 per cent - near the typical holding levels of pension funds, two of the sources told Reuters.
Khazanah is also looking to reduce its physical presence in overseas locations such as London, Mumbai and Silicon Valley, two other sources said. It is considering offloading some of its foreign properties and tech investments too, they added.
"They are not desperate to raise money, not in the way that erodes value. It would be very structured and gradual but it will be done, because the immediate objective is to raise money," according to one of the sources.
Khazanah, traditionally more of a strategic investor, declined to comment. The sources, who declined to be identified, added that Khazanah's aim is to manage its holdings as a portfolio investor rather than as an active direct investor.
A senior Asia M&A banker at a US investment bank said: "For the first time, I'm seeing real gumption on the part of Khazanah... Malaysia is food for (mergers and acquisitions) bankers. The country needs money and a lot of Khazanah sell-downs will have to happen."
Sources said Khazanah's assets could attract interest from Japanese players, other Asian investors and global funds.
Khazanah's 60:40 venture with Singapore's Temasek, M+S, is in advanced talks with investors to sell office space, a hotel and retail components of the DUO property development, other sources added. The deal could fetch as much as $2 billion and an announcement could come in the next few weeks, they said.
Mr Prasenjit Basu, chief economist at CrossASEAN Research and a former co-head of research at Khazanah, said the changes indicate a complete re-setting of priorities. "From being a 'private equity'-type investor, Khazanah will become a portfolio investor."