This article first appeared in The Edge Malaysia Weekly on February 17, 2025 - February 23, 2025

PERMODALAN Nasional Bhd (PNB) and the country’s sovereign wealth fund Khazanah Nasional Bhd were in the news last year over investment losses in FashionValet (FV), a modest fashion e-commerce group.

To aggravate matters for the government-linked investment companies (GLICs), there were allegations of fund mismanagement by FV founders, Datin Vivy Yusof and her husband Datuk Fadzaruddin Shah Anuar. Last December, the influencers were charged with criminal breach of trust involving RM8 million of investment funds from Khazanah and PNB. Both have pleaded not guilty to the charges.

From the RM20 million invested in FV in 2018, PNB incurred a loss of RM18.7 million upon the GLIC’s exit from the fashion platform in 2023.

PNB had previously said that the investment in FV complied with its detailed evaluation and due diligence process for private investment. Furthermore, the investment was made using its proprietary fund, and not the unit trust funds under Amanah Saham Nasional Bhd subscribed by the public.

When asked what went wrong with the FV investment, PNB president and group chief executive Datuk Abdul Rahman Ahmad’s initial response is to emphasise the high-risk, high-return nature of private equity.

“It’s impossible … you can ask the best private equity firm in the world … to get it right for all investments. Private equity is managed as a portfolio rather than as an individual investment and whether we are able to deliver returns as a portfolio.

“Of course, we work on the basis that every investment is carefully evaluated with the necessary due diligence. So, rest assured that in terms of the governance process for any investment that we take, it is done carefully and evaluated with all the necessary procedures,” he explains.

He reiterated that the FV investment was seen as a high-growth and early-stage private equity investment that showed strong growth potential at the point of investing.

“Revenue at the time we invested was RM60 million and in about one year, it rose to RM100 million. At that point in time, it was a company that was at the intersection of e-commerce and fashion, which is something that, internationally, there were already comparable companies that have made the model work,” he says.

However, two factors turned the tide for FV — a major one being the shift from brand owners using a common fashion portal to dealing directly with customers during the pandemic.

FV’s strategy to have an omnichannel presence, where it invested in beefing up its physical stores while improving the technology stack investment, came at the most inopportune time with the Covid-19 pandemic throwing a spanner in the works.

These factors created a cash crunch for the company.

“They [the FV team] asked for existing investors to invest [during this period] but this is where risk management came in, so when we saw that the company hadn’t delivered on what was done [investments made], we did not put in more money because of risk management.

“We fully acknowledge that the money is significant, even though as a proportion to total fund size, it is small. But as with any investment company, you need to be able to make the investment as a portfolio, and it is impossible to get it right all the time and not incur losses on the portfolio,” Abdul Rahman points out.

As a portfolio, PNB’s private equity investment has crystallised RM3.3 billion in gross proceeds and made a profit of RM1.2 billion over the last three years. The amount includes the losses from the FV investment.

“Nobody can guarantee perfection in terms of investment,” he adds.

PE makes up about 5% of PNB’s total asset allocation, according to PNB deputy president and group chief executive Datuk Rick Ramli.

Notably, PNB’s private equity portfolio is diversified across the globe where the bulk of it is made through private equity funds and a small portion through co-investments.

Abdul Rahman shares that PNB will be reducing its domestic direct private investment and focus on fund investment. This comes as Ekuiti Nasional Bhd, now placed under Yayasan Pelaburan Bumiputra (YPB) following the consolidation of bumiputera-focused investment institutions into YPB, has been given the mandate to focus on domestic direct private investment.

One of PNB’s largest direct private investments in the country is Perusahaan Otomobil Kedua Sdn Bhd (Perodua), in which it owns a 10% stake.

It was also the sole shareholder of Malaysian Industrial Development Finance Bhd (MIDF) before it was acquired by Malaysia Building Society Bhd (MBSB) for RM1.01 billion in the form of 1.05 billion new MBSB shares at 96.52 sen each. As a result of the acquisition, PNB became a substantial shareholder of MBSB with a 12.78% stake.

PNB has also successfully exited some of its smaller minority longstanding private investments in companies such as Unilever Malaysia in 2020 and Mondi Malaysia in 2022. 

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