Khazanah Nasional Berhad, Malaysia's Kuala Lumpur-based sovereign wealth fund, reported a 61% drop in profits on its mix of commercial and strategic investments for 2020.
The fund pushed forward with a two-year exercise in rebalancing its portfolio against the backdrop of "a challenging economy" and the unprecedented impact of the COVID-19 pandemic, managing in some places to take advantage of the volatility, Shahril Ridza Ridzuan, Khazanah's managing director, said Thursday in a news release.
"Despite these challenges, we were able to build on our efforts in recent years, allowing us to navigate the economic uncertainty," Mr. Shahril said.
Khazanah's profit from operations plunged to 2.9 billion ringgit ($717.8 million) from 7.4 billion ringgit the year before.
Dividend income rose to 5.2 billion ringgit from 3.8 billion ringgit the year before, but divestment gains dropped to 2.7 billion ringgit from 9.9 billion ringgit.
Despite the drop in profits, Khazanah declared a dividend payout to the government of 2 billion ringgit, double the previous year's dividend.
The pandemic hit the value of Khazanah's strategic investments — which include aviation and tourism-related assets. The realizable asset value of Khazanah's strategic fund stood at 27.9 billion ringgit as of Dec. 31, down about 15% from the year before.
For the year, Khazanah reported 6 billion ringgit of impairments, up from 4.9 billion ringgit the year before, including a 3.1 billion ringgit write-down for Malaysia Aviation Group Berhad and 1.8 billion ringgit for Themed Attractions Resorts & Hotels.
The realizable asset value of Khazanah's commercial fund stood at 95.3 billion ringgit at the end of 2020, a year that saw a shift to overseas assets from domestic assets. A 2019 figure was not available.
The Khazanah news release said public global assets accounted for 17% of the fund's commercial assets as of Dec. 31, up from 12% the year before, while Malaysian listed assets dropped to about 50% from 58%. Real assets declined to 8% from 10% while cash holdings jumped to 7% from 1%. Private equity held steady at 19%.
Mr. Shahril warned that 2021 will be another challenging year, even as vaccination programs hold out hope for better times to come. Key sectors for Malaysia, such as aviation and tourism, are unlikely to enjoy a full recovery before 2023, he predicted.
