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Malaysia to ‘recharge’ LPs for sustainable future

Perkukuh Pelaburan Rakyat aims to strengthen governance structures and ESG practices into the mandate of its LPs to help attract private investments.

Malaysia is planning a three-year reform initiative for its government-backed pool of institutional capital that will build ESG and sustainability practices in its investment strategy.

Prime Minister Muhyiddin Yassin unveiled a “mandate recharge programme” on Thursday called Perkukuh Pelaburan Rakyat which “aims to strengthen” the investment mandate of Malaysian LPs to invest for the future and “promote positive societal impact”, according to a statement announcing the initiative.

The programme is intended to update policies that direct how a group of pensions and sovereign wealth funds managing more than $400 billion in assets deploys capital based on environmental considerations and the “social protection” of citizens. Alongside existing development initiatives geared toward a future economy, the  nation also hopes Perkukuh will spur private investment.

Perkukuh is the first LP reform initiative Malaysia has implemented in 17 years and follows the country’s 1MDB scandal, which centred around corruption at one of Malaysia’s government-linked investment companies.

Malaysian LPs “fly quietly” among the global pool of institutional investors but are drawing an increasing amount of attention from asset managers, according to David Tung, Carlyle Group’s former top investor relations executive in Asia-Pacific. Tung told affiliate publication Private Equity International in May: “They [Malaysian LPs] can write very large tickets and have become quite active as well.”

Yassin outlined five outcomes and 20 key initiatives that the country’s largest investors – including Permodalan Nasional Berhad, Kumpulan Wang Persaraan, Employees Provident Fund of Malaysia and Khazanah Nasional – will seek to implement by 2024. “All Malaysians will stand to benefit from the strengthened risk-return performance,” the statement said.

The five goals and some of the key initiatives are:

Outcomes

  1. Sharpened clarity on the mandate of each government-linked investment company
  2. Enhanced focus on developmental and catalytical investments to spur new growth and enhance socio-economic impact
  3. Crowd-in the private sector while streamlining the role of the government and its agencies in business
  4. Future-proof GLICs with best-in-class governance, capabilities and strategies
  5. Strengthen social safeguards and fiscal resilience

Initiatives

  • Review golden share structure in investee companies
  • Pooling of management for certain asset classes to optimise the operations of SWFs and institutional investors
  • Development of new growth ecosystems
  • Redefine strategic sectors and new areas of national interest
  • Scale up GLIC’s role in the socio-economic space like human capital development, financial literacy and Bumiputera empowerment