Kuala Lumpur: Malaysia’s second-largest state pension fund, Kumpulan Wang Persaraan (Diperbadankan), has announced that the fund will double its holdings of global Islamic bonds (Sukuk) as the fund is looking for better returns on its sukuk.
The retirement-savings vehicle, also known as KWAP, will increase the size of a $100 million sukuk fund that it started in 2011, said Chief Executive Officer, Wan Kamaruzaman Wan Ahmad. KWAP, which oversees 91 billion ringgit ($28 billion), uses external companies to manage the global Shariah holdings.
“We plan to outsource another $100 million and have sent out requests for proposals to select new managers,” Wan Kamaruzaman said in an interview in Kuala Lumpur yesterday.
“We are doing so because the returns from sukuk are reasonable and the recent correction gives us the opportunity to enter the market at better levels,” he added.
The average yield on global bonds that comply with Islam’s ban on interest climbed 35 basis points, or 0.35 percentage point, to 4.12 percent this month after reaching a record low of 2.67 percent on Jan. 10, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. Global Shariah-compliant debt posted a loss of 2.1 percent in 2013, the gauge shows, while emerging-market securities dropped 9.8 percent, according to JPMorgan Chase & Co.’s EMBI Global Index.
KWAP plans to increase its holdings of international sukuk further in the future as part of a strategy to diversify its portfolio and increase its overseas investments, Wan Kamaruzaman said. Foreign holdings account for 6.2 percent of the fund’s assets and government debt makes up 24 percent of its portfolio, according to the data published on its website.