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KUALA LUMPUR (March 18): Malaysia’s pilgrimage fund Lembaga Tabung Haji is eyeing higher exposure to equities as it seeks to boost returns after years of conservative positioning.
The fund, which manages the savings of Muslim depositors for the haj pilgrimage, is reviewing its asset allocation strategy that historically has been skewed towards fixed income, according to its chairman Tan Sri Abdul Rashid Hussain.
“We have been operating very conservatively for many years, with the portfolio tilted more towards fixed income rather than equities,” he said at a media briefing on Wednesday. “It is time for us to review our portfolio strategy. This will be a work in progress.”
The review comes at the time the fund foresees that a softer global interest rate environment compresses yields from fixed income instruments that remain the largest component of its portfolio.
Tabung Haji also underwent a major restructuring in 2018 to address a massive gap between its liabilities and assets on its balance sheet that prevented the fund from paying dividends to its contributors.
Rashid said declining yields mean the fund must “make its money work harder”, putting equities as a relevant asset class, particularly if market conditions remain supportive within the domestic market.
Malaysian government sukuk makes up 23% of its portfolio, a legacy of the earlier restructuring efforts that continues to anchor returns but limits upside potential, according to Rashid.
While he ruled out any planned immediate overhaul, he indicated that a gradual increase in equity exposure is “inevitable” if Tabung Haji wants its fund to sustain and potentially improve its future dividend payouts.
As it stands, equity allocation has already risen to about 28% in recent years from the low-20% range previously.
In FY2025 alone, private equity emerged as the top-performing segment for the fund, delivering a return on investment of 8.29%. Fixed income, which accounts for about 53% of total assets, remains the fund's dominant contributor.
Equities, meanwhile, make up about 35% of its total assets with the rest in real estate and money market instruments.
However, Tabung Haji will be cautious in its move towards equities, given its responsibility and the highly liquid nature of its deposit base. “Deposits with us can be withdrawn at any time, so we cannot take excessive risk. Equity is inherently more volatile,” Rashid noted.