Khazanah Nasional, the sovereign wealth fund of Malaysia, has defended its decision not to make an early investment in Grab, the mega app for food delivery and ride-hailing in Southeast Asia.
According to the fund’s chief investment officer, Azmil Zahruddin, the investment approach is to concentrate on substantial investments rather than direct startup acquisitions.
Khazanah was unable to finalise a deal quickly to finance Grab, which was created in Malaysia.
Later, Grab attracted the interest of other investors, notably Singapore’s state-owned investor Temasek, and the ride-hailing behemoth relocated its headquarters to Singapore. Grab became the largest listing in the United States by a Southeast Asian firm in late 2021 after raising $4.5 billion and going public on Nasdaq through a SPAC merger with Altimeter Growth Corp.
According to others, Khazanah received criticism for what a “missed opportunity” for Malaysia.
“You have to look at what Khazanah is and what its DNA is,” In an exclusive interview with “CNBC Squawk Box Asia” on Thursday, Zahruddin said.
“Our DNA is that we manage large investments. [Venture capital] investing is not really what we do, and it’s not really our expertise and skill set.”
“So what we try to do is, instead of trying to do those investments directly, we actually seed investments into VC funds who then invest into companies around the region.”
Zahruddin concurred, though, that Malaysia needed to encourage its businesspeople and keep its top personnel.
He claimed that Khazanah would continue to support Malaysian start-ups through an indirect strategy of investing into funders that acquire shares in these young businesses and possibly investing directly in them if they have grown to a scale that satisfies the fund’s investment standards.
To that goal, Zahruddin claimed Khazanah made an early investment in Grab’s rival Uber through a backer who acted as a middleman and was prepared to do so.
In the Malaysian investment community, there were questions raised by Khazanah’s decision to invest in Uber rather than Grab, which was founded by two Malaysians.
Grab is the industry leader in Singapore and is present throughout Southeast Asia. The business has been losing money ever since it went public last year, and in its most recent results for the first quarter, Grab reported a net loss of $435 million despite an increase in revenue of $228 million, or 6%, year over year.
Expectations for venture capital markets
According to Zahruddin, the venture capital markets have been quite difficult, and many endowment funds that have participated in the venture capital market have suffered a decline in their investments of up to 40% over the previous year.
But as it has been doing for the past ten years, Khazanah would continue to invest money in the technology sector.
“In hindsight, it is a good thing that we’re not really able to do direct investments anyway, because that is something that is quite challenging for anyone who’s been in VC,” Zahruddin said.
In 2021, Khazanah reported annual income of 670 million Malaysian ringgit, or $150.36 million, a decline of about 80%. Profits also decreased by almost 60% to RM $2.9 billion the previous year.
The sovereign wealth fund said that its continuous provision of financial support to its airlines and tourism ventures suffering from Covid-19 delays was the cause of the decline in profits.
Following a meeting in Istanbul between officials of the fund and the Turkey Wealth Fund, Khazanah declared last month that it will look into fresh investment prospects in Turkey.