In the days after the Malaysian government implemented a $3.4 trillion sovereign wealth fund to help the country meet its financial obligations, investors have been seeking better ways to save.
“There are no good returns,” said Rohan Vaidya, managing director of financial services company Myspace, which has invested in the fund.
The fund’s aim was to make money by buying debt from state-owned banks and private companies, and by investing in the economy, not in government bonds. “
You’re losing a lot of money when you’re trying to save.”
The fund’s aim was to make money by buying debt from state-owned banks and private companies, and by investing in the economy, not in government bonds.
Its biggest asset is RM2.7 trillion ($3.45 trillion) in bank debt.
The fund is the largest private asset in Malaysia.
It is now worth about $1.9 trillion.
But the government says it is still investing in public sectors, including the military and the police.
To save money, investors are looking for “alternatives to government bonds, which are not good,” said Priscila Sarisamy, head of the macro strategy at PwC Malaysia.
But a lack of money is not the only problem investors face. “
But you still have the opportunity to get out.”
But a lack of money is not the only problem investors face.
Malaysia has no effective way to track how much debt the fund holds, and that means investors are often left to guess.
When asked about the fund, the finance ministry did not respond to a request for comment.
While many countries in Asia have public and private banks that provide access to debt markets, Malaysia is the only country that doesn’t.
According to the International Monetary Fund, the public sector debt held by the public banks accounts for a third of all public debt in Malaysia, while the private sector accounts for another third.
Since the fund was established, Malaysia has had to borrow $1 trillion to finance its $2.6 trillion debt, said Vaidyanath.
If the public and the private sectors were able to agree on a plan to manage the fund’s money, it could allow for the government to invest the savings and give a better return, he said.
But the fund is not yet in a position to do that.
As the fund has already received more than $1 billion from the government, there is little reason to expect it would be able to raise enough capital to cover the additional $1-trillion it needs to repay its debts, said Kuan Kwok Kwan, managing partner of consultancy firm BDA Group.
And there is a risk that the fund will not be able or willing to invest that much money to meet its liabilities, he added.
That means the government will have to tap private banks to help it meet its debts.
In a statement, the government said it has been working with private banks for more than a year to find a solution.
More than $2 billion in new capital has been earmarked for the fund since it was set up, the statement said.
However, the fund only has the capacity to borrow about $3 billion and will need more to fund its debt, which the government has said will be repaid in three to five years.
This means the fund may be unable to get a clear picture of how much money it needs and how it will use it, said Sarisary, who has advised several governments on how to manage debt.
“There’s no guarantee that it’s going to be able,” she said.
“So you have to look at all the different options.”
More to come.