How Malaysia’s $73bn state investor views the secondaries market

Permodalan Nasional Berhad, Malaysia’s largest state-backed investment company, has been an enthusiastic user of secondaries for both portfolio construction reasons and due to increased deal opportunities.

Overall, Kuala Lumpur-based PNB’s private markets division has an annual target to deploy $1 billion in commitments to private markets, with 40 percent going to direct and co-investment opportunities, and the remainder to funds. Its private markets team follows a Private Investment Framework which outlines investment allocations every three years, and is in its second such programme.

PNB’s private markets team has been actively seeking secondaries opportunities in its first two frameworks as capital deployment is generally faster than primary funds, Rick Ramli, chief investment officer for private and strategic investments, told affiliate title Private Equity International.

“When we went from PIF I to PIF II, we essentially allocated more to secondaries because we saw a greater need for liquidity within PNB, and we also saw that the secondary markets were maturing nicely and there was a lot of dealflow in the secondary market,” Ramli said. The institution participates in both GP- and LP-led opportunities and is open to continuation funds.

As the largest state-backed investor in Malaysia, PNB has capacity to commit hundreds of millions of dollars per opportunity. For secondaries, the investor generally participates with a low three-digit ticket and a double-digit ticket for more nascent vehicles.

“For the global buyout funds, the ticket size has been larger historically,” Ramli noted. “For directs, it’s usually a smaller amount because ultimately you’re taking a higher risk as you are doing it in a particular company.”

PNB was established in 1978 as a part of Malaysia’s New Economic Policy and, until 2016, focused solely on domestic public equity investments. According to its latest annual report, it managed about 341.6 billion ringgit ($73.49 billion; €67.33 billion) of total assets as of 31 December. Private equity makes up 4.5 percent of the fund’s total assets, having increasing from 2.8 percent in 2020 and 3.9 percent in 2021, and will continue to grow up to a 6-7 percent target allocation.