Valuecap should reveal accounts before getting RM5b

The government wants to inject RM5 billion into Valuecap Sdn Bhd to “invest” in the stock market. This money is supposed to be borrowed from the EPF (your retirement money). This is the same EPF that has lent RM3 billion to the Bakun Dam developer.

Before the RM5 billion is channelled to Valuecap, let’s make public Valuecap’s detailed financial statements and look at how it has performed relative to the KLCI index since 2003, when it began operations. Since it is supposed to be in the black, there should not be any objections to this. Show us which counters it has invested in. That would only be fair – if they want to use our money. Without transparency, how can we hope to inspire confidence?

Valuecap is a fund management firm established in 2002 to invest in the stock market. It has been described as “the brainchild of Second Finance Minister Nor Mohamed Yakcop”.

It is jointly owned by:

• Khazanah Nasional Bhd, the government’s investment arm,
• Permodalan Nasional Bhd, and
• Retirement Fund (Incorporated) or KWAP, a statutory body established on 1 March 2007 under the Retirement Fund Act 2007 (which replaces the repealed Pensions Trust Fund Act 1991). KWAP was set up to assist the Federal Government in funding its liability of pension payouts. Its investment strategy is 30 per cent (plus/minus 10 per cent) in equity investments and a similar percentage in fixed investments.

The other big question: why use EPF funds, which is public money held in trust? Surely, this is not the time to dabble in the stock market using public money when conditions are so volatile. Why can’t Khazanah, PNB and KWAP tap into other sources of funds?

Which leads to the other question: what kind of return can the EPF expect to get from its loan to Valuecap and how does that expected return compare with more stable, less risky investments? Speaking of the EPF, we have been told that 20 per cent of its RM330 billion funds has been invested in shares. But how much has been invested in loans for infrastructure projects and other investments with low or questionable returns?

This excerpt from The Edge Daily:

There is little public information on the stocks that Valuecap has invested in. Information on its investments is only known through annual reports of companies they have invested in.

However, based on filings with the Companies Commission of Malaysia, Valuecap is very much in the black despite the bearish stock market. As of Dec 31, 2007 it had total assets worth RM7.56 billion and posted an after-tax profit of RM1.1 billion for the year.

As for returns to its shareholders, it has been reported that since its inception to September 2007, Valuecap had paid out a total of RM135 million in dividends.

Attempts to contact Valuecap or its chief executive officer Sharifatu Laila Syed Ali on the stocks invested were unsuccessful.

Nevertheless, based on industry information obtained by The Edge Financial Daily, Valuecap is believed to have about RM4.9 billion worth of investments in 70 companies currently.

These companies are from a variety of segments and include the YTL Group, the IJM group, Malayan Banking Bhd, Hong Leong Bank Bhd, Public Bank Bhd, Tenaga Nasional Bhd, Malaysian Oxygen Bhd, Amway (M) Holdings Bhd and PLUS Expressways Bhd. The list also shows that Valuecap has interest in Real Estate Investment Trusts (REIT) such as Axis REIT and Quill Capital Trust REIT. (See table)

Meanwhile, an exchange-traded fund launched last January by Valuecap’s wholly owned subsidiary, i-Vcap is feeling the effects of the sharp drop in equity prices.