KUALA LUMPUR (June 26): Permodalan Nasional Bhd’s (PNB) gross income dropped 20.64% to RM14.53 billion for the year ended Dec 31, 2022 (FY2022), from RM18.31 billion a year earlier, while net income fell 11.9% to RM10.38 billion from RM11.79 billion, amid the weak performance of both bond and equity markets.

“The year under review (FY2022) was the worst year in decades for public markets globally, with both public equities and fixed income assets simultaneously registering markedly negative returns,” the fund management company said in its annual report published on Monday (June 26).

Total assets under management (AUM) grew to RM341.6 billion last year, from RM336.7 billion in 2021, according to the report.

Lower net income coupled with expansion in AUM had led to a lower return on assets for PNB last year, down to 3.1%, from 3.6% in 2021, and 3.5% in 2020 and 2019.

Looking towards 2023, PNB said it will continue to seek opportunities as volatility is expected to remain high in the financial markets impacted by continuing interest rate hikes, inflationary effects, and geopolitical uncertainties.

PNB president and group chief executive Ahmad Zulqarnain Onn said the company remains committed to its diversification strategy in 2023 which includes introducing infrastructure as a new asset class in recognition of its relative stability.

“Looking ahead, we remain optimistic about the future and will continue to explore new green and transition investment opportunities in this ever-changing environment, to ensure sustainable returns to our unitholders whilst safeguarding their investments,” he said in the annual report.

PNB’s units in circulation for all funds expanded to 282.9 billion units last year from 276.2 billion in 2021, while the number of accounts increased to 15.2 million from 14.8 million over the same period.

Ahmad Zulqarnain said 2023 is set to be an “important year of change” for PNB, marked by the fund’s relocation to Menara Merdeka 118 from Menara PNB, which it has occupied since 1985.

He added that PNB plans to expand its advisory offerings and enhance its digital channels, with one of the initiatives being the launch of a robo adviser that will be part of the myASNB application.

“The robo adviser will, through its algorithm, facilitate the process of selecting suitable investments based on an individual's risk tolerance and investment goals.

“We also begin a 27-year journey towards net zero for our portfolio. This will be one of the most complex undertakings for all asset owners and managers and will require a confluence of initiatives to take place that will include re-balancing the portfolio towards low emissions companies and industries, direct engagement with our investee companies, and changes in public policy,” he said.

According to the annual report, asset allocation for public equity dropped to 70.8% in 2022 from 73.3% in 2021, while the fund upped its allocation for cash and money market slightly to 11% from 10.7%, fixed income to 7.3% from 6.5%, real estate to 6.1% from 5.2% and private markets to 4.5% from 4%.

“Although markets rebounded somewhat in the fourth quarter of 2022, both developed and emerging markets still ended the year with significant drawdowns…. Consequently, PNB remained judicious in its global public equity investments in 2022, tactically shifting regional and sectoral allocations and going risk-off where warranted, whilst also taking advantage of the market volatility to both take profit as well as accumulate positions at attractive entry points, in line with our long-term fundamentals-based investment approach,” said PNB.

Although allocation to private markets currently stood at 4.5%, PNB said it intends to increase it to 6%-7% of its AUM under a five-year asset allocation strategy.

For the real estate asset class, PNB said 2023 is foreseen to remain challenging for the real estate industry arising from risks like interest rate hikes and geopolitical tension.

Nonetheless, the fund said there continue to be more opportunities to be tapped in the industrial and logistics space.

“PNB will remain focused on core real estate assets, whilst enhancing our real estate portfolio through active capital recycling activities and ongoing progress in our key development projects,” it said.