Investments with a mission for the public

Reading Time: 6 minutes
Tan Sri Hamad Kama Piah Che Othman, President and Group Chief Executive of Permodalan Nasional Berhad (PNB)

Permodalan Nasional Berhad (PNB) is Malaysia’s biggest unit trust management company, but it is not just that. The focus of the company lies on the Bumiputera community, and its objective is to increase the wealth of the Malay and the indigenous people by providing them with bespoke trust schemes and unit trust funds and encouraging them to invest into their own prospering economy and promising foreign assets. Inside Investor caught up with Tan Sri Hamad Kama Piah Che Othman, PNB’s President & Group Chief Executive, to learn more about the company’s objectives and milestones.

The sheer size of PNB’s assets is nothing but impressive and could easily make other global fund companies jealous. At the end of December 2011, PNB’s assets under management stood at a little over RM200 billion, which is equivalent to about $66 billion. 70 per cent of the money originates from investments made by the Malaysian public into the company’s unit trust funds, while the rest belongs to the proprietary fund of PNB.

“We have gone a long way from the early days when our first unit trust was launched in 1981, where we managed to amass RM540 million from the public,” said Tan Sri Hamad.

“In fact, when I became CEO in 1998, our assets under management were about RM40 billion. So in the last 13 years alone, our assets have grown fivefold to where we are today.”

Prior to the establishment of PNB, efforts to increase Bumiputera ownership in the corporate sector were not sufficient as shares allocated to individuals were seldom retained. Research indicated that when Bumiputera shareholders sold their shares, the proceeds were mostly not reinvested.

This changed with PNB. Substantial shares were acquired in major Malaysian corporations from funds originally provided by the government. They were transferred to a trust fund and sold to the Bumiputera in the form of smaller units. Through this investment model, PNB ensured that these shares were retained, resulting in the cultivation of widespread savings habits, and development of entrepreneurship and investment skills of Bumiputera.

Today, the company offers a diversified portfolio that includes unit trusts, institution property trust, property management, and asset management.

However, the journey has not always been easy, said Tan Sri Hamad.

Crises on the way

“We also faced a few of the most severe crises along the way – for example the Asian financial crisis, the subprime crisis, and subsequently the global financial crisis. We have seen many long-standing institutions crumbling due to the severity of some of these crises such as Lehman Brothers, Merril Lynch, Bear Stearns, and Citigroup, and so we are indeed very thankful that PNB has managed to survive these difficult times and we still manage to garner the support and trust of our unitholders.”

Traditionally, PNB’s assets have been invested mostly in equities. Over the years, the company has continuously restructured its portfolio to reduce dependency on a particular asset class and to withstand any setbacks in the equity market.

“We are now intensifying our focus on international properties. Since 2011, we have acquired a few international properties, namely Santos Place in Brisbane as well as Milton & Shire House, One Exchange Square, and 90 High Holborn in London. These acquisitions are part of our broader strategy in expanding PNB’s exposure in the property sector,” Tan Sri Hamad said.

Another current major project is the construction of an iconic 100-storey mixed development comprising offices, retail space, hotel, and apartments in Kuala Lumpur.

Aside from this, PNB is also expanding its international business operations. After having set up branches in Singapore, Tokyo, and London, there will be another presence New York soon, Tan Sri Hamad revealed.

Money sources

The funds for new acquisitions are mainly sourced from the public subscription of PNB’s unit trust products.

“Last year alone, we managed to obtain RM17 billion additional investment. And we also use our proprietary fund alongside bank borrowings to finance most of our projects and corporate exercises,” Tan Sri Hamad said.

PNB uses the Minggu Saham Amanah Malaysia (MSAM) initiative, which can be loosely translated as “Malaysian Unit Trust Week”, as a social effort to educate the public on investment and encourage them to actively participate in the country’s unit trust industry. MSAM aims to educate and enhance public understanding on investment, especially the relationship between risks and returns from investment. MSAM also aims at positioning unit trust as the main choice of investment instrument, in line with the objective of long-term investment for long-term strategy

“PNB was created as a vehicle to help restructure society and to increase participation of the Bumiputera community in the nation’s economy,“ Tan Sri Hamad said.

“At the time of our formation, the Bumiputera majority only held two per cent of the economic pie. As such, PNB had to come up with innovative products to achieve these objectives,” he added.

One product was Sekim Amanah Saham Nasional (ASN), introduced in 1981, which was targeted at the Bumiputera community directly, which at the time was characterised by low levels of incomes and savings, high risk aversion, little knowledge of investment, and predominantly lived in rural communities. To mobilise Bumiputera savings and investments under these conditions, ASN was designed with some special attributes, one of which was the fixed par value of RM1.

Among the others was high liquidity to enable on-the-spot redemption, an extremely low threshold for initial investment of RM10 and subsequent investment of RM1, and access through a wide network of agents which included all the major banks as well as post offices. Actually, ASN was an innovative hybrid between a unit trust and a bank savings account.

“These special characteristics meant that as a product, ASN was easy to explain to the rural poor, it was affordable to participate in, accessible in every village, and offered fast access to savings when necessary,” said Tan Sri Hamad.

ASN, which was later superseded by Amanah Saham Bumiputera, and subsequent fixed-priced funds which are open to all Malaysians, are intended to provide those of lesser means the ability to save and invest in the capital markets which would otherwise not be possible through conventional unit trust schemes.

“As such, the fixed price unit trust schemes under PNB offer a way to reduce income and wealth disparities between rich and poor, irrespective of race,” Tan Sri Hamad added.

Currently, PNB offers five fixed price funds, of which three are open to all Malaysians while the other two are exclusively maintained for Bumiputera. There are also four variable price funds, of which two are open to all Malaysians and the other two are kept for Bumiputera.

Amanah Saham Nasional Berhad, a subsidiary of PNB, manages these nine funds. Another subsidiary, Amanah Mutual Berhad, provides alternative unit trust funds with different features such as the Structured Investment Fund targeted at more sophisticated investors. Aside from that, PNB also offers unit trust products in the Singapore market through Singapore Unit Trusts Pte Ltd.

Social impact

Given the size of the funds and the number of unit holders, which currently stand at 10.8 million, the social impact of PNB on the community is big. This is why the company has developed a corporate social responsibility scheme and is showing its commitment towards developing an investment-savvy society.

“We have launched an integrated education programme for various levels of the society. We are passionate about empowering the masses with knowledge on investment because we believe that is the key to maintain the loyalty of our unit holders,” said Tan Sri Hamad.

The integrated education programmes include various activities to cater to different age groups and backgrounds. There is also a special programme called “360 days Investment Seminar” where PNB conducts free sessions to educate the public on investment on almost every single day of the year at various different locations throughout the nation. The most coveted event, the above mentioned annual “Minggu Saham Amanah Malaysia”, is held on April 20th every year and features exhibitions and activities on investment education as well as to create public awareness on PNB’s role and responsibilities.

PNB’s investment policy over time also contributed to the government’s New Economic Policy (NEP) by involving Bumiputera investors.

“In the beginning, gaining people’s trust and confidence for the government’s objectives was the major hurdle. The population generally was not familiar with the concept of a unit trust fund,” Said Tan Sri Hamad.

“PNB officers had to personally reach out to village folks to get them to invest. However, over the years, participation of the Bumiputera in the Malaysian economy has increased and I believe one of the reason is due to the relentless efforts made by the government through the NEP.

“I am happy to have been able to contribute directly towards achieving the objectives of the NEP. To date, PNB has given out more than RM90 billion of income distribution and bonus to our almost 11 million account holders.”

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 6 minutes

Tan Sri Hamad Kama Piah Che Othman, President and Group Chief Executive of Permodalan Nasional Berhad (PNB)

Permodalan Nasional Berhad (PNB) is Malaysia’s biggest unit trust management company, but it is not just that. The focus of the company lies on the Bumiputera community, and its objective is to increase the wealth of the Malay and the indigenous people by providing them with bespoke trust schemes and unit trust funds and encouraging them to invest into their own prospering economy and promising foreign assets. Inside Investor caught up with Tan Sri Hamad Kama Piah Che Othman, PNB’s President & Group Chief Executive, to learn more about the company’s objectives and milestones.

Reading Time: 6 minutes

Tan Sri Hamad Kama Piah Che Othman, President and Group Chief Executive of Permodalan Nasional Berhad (PNB)

Permodalan Nasional Berhad (PNB) is Malaysia’s biggest unit trust management company, but it is not just that. The focus of the company lies on the Bumiputera community, and its objective is to increase the wealth of the Malay and the indigenous people by providing them with bespoke trust schemes and unit trust funds and encouraging them to invest into their own prospering economy and promising foreign assets. Inside Investor caught up with Tan Sri Hamad Kama Piah Che Othman, PNB’s President & Group Chief Executive, to learn more about the company’s objectives and milestones.

The sheer size of PNB’s assets is nothing but impressive and could easily make other global fund companies jealous. At the end of December 2011, PNB’s assets under management stood at a little over RM200 billion, which is equivalent to about $66 billion. 70 per cent of the money originates from investments made by the Malaysian public into the company’s unit trust funds, while the rest belongs to the proprietary fund of PNB.

“We have gone a long way from the early days when our first unit trust was launched in 1981, where we managed to amass RM540 million from the public,” said Tan Sri Hamad.

“In fact, when I became CEO in 1998, our assets under management were about RM40 billion. So in the last 13 years alone, our assets have grown fivefold to where we are today.”

Prior to the establishment of PNB, efforts to increase Bumiputera ownership in the corporate sector were not sufficient as shares allocated to individuals were seldom retained. Research indicated that when Bumiputera shareholders sold their shares, the proceeds were mostly not reinvested.

This changed with PNB. Substantial shares were acquired in major Malaysian corporations from funds originally provided by the government. They were transferred to a trust fund and sold to the Bumiputera in the form of smaller units. Through this investment model, PNB ensured that these shares were retained, resulting in the cultivation of widespread savings habits, and development of entrepreneurship and investment skills of Bumiputera.

Today, the company offers a diversified portfolio that includes unit trusts, institution property trust, property management, and asset management.

However, the journey has not always been easy, said Tan Sri Hamad.

Crises on the way

“We also faced a few of the most severe crises along the way – for example the Asian financial crisis, the subprime crisis, and subsequently the global financial crisis. We have seen many long-standing institutions crumbling due to the severity of some of these crises such as Lehman Brothers, Merril Lynch, Bear Stearns, and Citigroup, and so we are indeed very thankful that PNB has managed to survive these difficult times and we still manage to garner the support and trust of our unitholders.”

Traditionally, PNB’s assets have been invested mostly in equities. Over the years, the company has continuously restructured its portfolio to reduce dependency on a particular asset class and to withstand any setbacks in the equity market.

“We are now intensifying our focus on international properties. Since 2011, we have acquired a few international properties, namely Santos Place in Brisbane as well as Milton & Shire House, One Exchange Square, and 90 High Holborn in London. These acquisitions are part of our broader strategy in expanding PNB’s exposure in the property sector,” Tan Sri Hamad said.

Another current major project is the construction of an iconic 100-storey mixed development comprising offices, retail space, hotel, and apartments in Kuala Lumpur.

Aside from this, PNB is also expanding its international business operations. After having set up branches in Singapore, Tokyo, and London, there will be another presence New York soon, Tan Sri Hamad revealed.

Money sources

The funds for new acquisitions are mainly sourced from the public subscription of PNB’s unit trust products.

“Last year alone, we managed to obtain RM17 billion additional investment. And we also use our proprietary fund alongside bank borrowings to finance most of our projects and corporate exercises,” Tan Sri Hamad said.

PNB uses the Minggu Saham Amanah Malaysia (MSAM) initiative, which can be loosely translated as “Malaysian Unit Trust Week”, as a social effort to educate the public on investment and encourage them to actively participate in the country’s unit trust industry. MSAM aims to educate and enhance public understanding on investment, especially the relationship between risks and returns from investment. MSAM also aims at positioning unit trust as the main choice of investment instrument, in line with the objective of long-term investment for long-term strategy

“PNB was created as a vehicle to help restructure society and to increase participation of the Bumiputera community in the nation’s economy,“ Tan Sri Hamad said.

“At the time of our formation, the Bumiputera majority only held two per cent of the economic pie. As such, PNB had to come up with innovative products to achieve these objectives,” he added.

One product was Sekim Amanah Saham Nasional (ASN), introduced in 1981, which was targeted at the Bumiputera community directly, which at the time was characterised by low levels of incomes and savings, high risk aversion, little knowledge of investment, and predominantly lived in rural communities. To mobilise Bumiputera savings and investments under these conditions, ASN was designed with some special attributes, one of which was the fixed par value of RM1.

Among the others was high liquidity to enable on-the-spot redemption, an extremely low threshold for initial investment of RM10 and subsequent investment of RM1, and access through a wide network of agents which included all the major banks as well as post offices. Actually, ASN was an innovative hybrid between a unit trust and a bank savings account.

“These special characteristics meant that as a product, ASN was easy to explain to the rural poor, it was affordable to participate in, accessible in every village, and offered fast access to savings when necessary,” said Tan Sri Hamad.

ASN, which was later superseded by Amanah Saham Bumiputera, and subsequent fixed-priced funds which are open to all Malaysians, are intended to provide those of lesser means the ability to save and invest in the capital markets which would otherwise not be possible through conventional unit trust schemes.

“As such, the fixed price unit trust schemes under PNB offer a way to reduce income and wealth disparities between rich and poor, irrespective of race,” Tan Sri Hamad added.

Currently, PNB offers five fixed price funds, of which three are open to all Malaysians while the other two are exclusively maintained for Bumiputera. There are also four variable price funds, of which two are open to all Malaysians and the other two are kept for Bumiputera.

Amanah Saham Nasional Berhad, a subsidiary of PNB, manages these nine funds. Another subsidiary, Amanah Mutual Berhad, provides alternative unit trust funds with different features such as the Structured Investment Fund targeted at more sophisticated investors. Aside from that, PNB also offers unit trust products in the Singapore market through Singapore Unit Trusts Pte Ltd.

Social impact

Given the size of the funds and the number of unit holders, which currently stand at 10.8 million, the social impact of PNB on the community is big. This is why the company has developed a corporate social responsibility scheme and is showing its commitment towards developing an investment-savvy society.

“We have launched an integrated education programme for various levels of the society. We are passionate about empowering the masses with knowledge on investment because we believe that is the key to maintain the loyalty of our unit holders,” said Tan Sri Hamad.

The integrated education programmes include various activities to cater to different age groups and backgrounds. There is also a special programme called “360 days Investment Seminar” where PNB conducts free sessions to educate the public on investment on almost every single day of the year at various different locations throughout the nation. The most coveted event, the above mentioned annual “Minggu Saham Amanah Malaysia”, is held on April 20th every year and features exhibitions and activities on investment education as well as to create public awareness on PNB’s role and responsibilities.

PNB’s investment policy over time also contributed to the government’s New Economic Policy (NEP) by involving Bumiputera investors.

“In the beginning, gaining people’s trust and confidence for the government’s objectives was the major hurdle. The population generally was not familiar with the concept of a unit trust fund,” Said Tan Sri Hamad.

“PNB officers had to personally reach out to village folks to get them to invest. However, over the years, participation of the Bumiputera in the Malaysian economy has increased and I believe one of the reason is due to the relentless efforts made by the government through the NEP.

“I am happy to have been able to contribute directly towards achieving the objectives of the NEP. To date, PNB has given out more than RM90 billion of income distribution and bonus to our almost 11 million account holders.”

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid