LTAT goals to set the benchmark

KUALA LUMPUR: Lembaga Tabung Angkatan Tentera (LTAT) chief govt officer Datuk Ahmad Nazim Abdul Rahman has been having his work minimize out for him for the previous 9 months as he oversees the tall order of remodeling the armed forces retirement fund right into a world-class fund.

“It has been difficult however I do benefit from the restructuring and turnaround work. I spent some years of my profession in personal fairness and company finance, so a big a part of my work has revolved round restructuring actions,” he mentioned.

Ahmad Nazim has twenty years of expertise in company finance and funding. Previous to becoming a member of LTAT, he was primarily based in Singapore and the United Arab Emirates as managing director of South-East Asia of Allied Funding Companions, an funding and advisory agency.

He additionally served as CEO of Pelaburan Mara Bhd from 2013 to 2018, was a pioneering member of the board of the Nationwide Financial institution of Abu Dhabi (M) Bhd, and is presently a member of the boards of the Power Fee Malaysia, Perbadanan Tabung Pendidikan Nasional Bhd, Boustead Holdings Bhdand Boustead Heavy Industries Corp. Bhd.

He studied economics and public coverage at Sciences Po in Paris and was a J. William Fulbright scholar at Georgetown College the place he acquired his Grasp of Legal guidelines. He learn legislation for his first diploma on the Worldwide Islamic College Malaysia.

Since reporting for responsibility on June 15, 2021 because the fund’s CEO, Ahmad Nazim has hit the bottom working to beat the challenges confronted by LTAT, particularly on a number of crucial issues that required quick consideration.

9 months into his function, he has accelerated LTAT’s transformation journey to stabilize the fund, rebalanced the funding portfolio, supplied readability on LTAT’s mission, and strengthened the fund’s governance, inside processes, and controls.

The quick results of the transformation could possibly be seen within the declaration of a dividend charge of 4.1% for the monetary 12 months ended Dec 31, 2021, a rise from 3.5% in 2020 and the best since 2018.

It was step one ahead in steering the fund in the direction of delivering a sustainable and aggressive return for the Malaysian Armed Forces.

“I would love LTAT to develop right into a world-class retirement fund, which implies that we’ve to be pushed by a transparent mission and strategic aims, that’s to generate funding returns backed by a powerful basis in governance.

“Within the general scheme, the mission ought to, in the long run, present a steady return on the pension funds of the armed forces and provides them the required monetary and social safety upon their retirement,” he mentioned.

Transformation plan, SAA framework

In response to Ahmad Nazim, LTAT will proceed to boost its prospects via its transformation plan, premised on strengthening and rebalancing its funding portfolio whereas enhancing its organizational construction, danger administration, company governance practices, inside processes in addition to human capital growth.

“In the intervening time, the transformation plan is shifting in the proper course,” he mentioned, including that there are two key initiatives that can drive the transformation and strengthening of the governance of LTAT this 12 months, which embrace the proposed amendments of the Armed Forces Fund (TAT) Act 1973 in addition to the operationalisation of the strategic asset allocation (SAA) framework.

“The TAT Act has not gone via any main structural change since its institution and the present provisions are overly stringent and might not be related in present instances.

“Due to this fact, we had accelerated the method for the modification since final 12 months, so this 12 months we should always be capable of have the TAT Act amended,” he mentioned.

The modification may also enhance LTAT’s plan to show across the fund in accordance with its SAA plan, he added.

In response to Nazim, the SAA framework is an funding plan which units the long-term course in the direction of higher diversification of the portfolio. It additionally provides a clearer concept of ​​the place to take a position and the way a lot to take a position over the long run.

“The important thing concept of ​​the SAA framework is to maneuver away from investing largely in illiquid belongings into extra liquid belongings in addition to income-generating belongings (native and worldwide) however on the identical time preparing for opportunistic investments to boost returns.

“For instance, co-investments with native and worldwide asset managers, together with different government-linked funding corporations into personal fairness and actual property funds and in defense-related sectors via our investee corporations to extend synergy between LTAT’s investments within the protection eco-system .

“SAA would be the spine of our long-term funding technique and can assure sustainable and aggressive returns to its contributors, comprising the Malaysian Armed Forces,” he mentioned.

Commenting on the important thing fascinating outcomes by assembly the SAA goal, Nazim mentioned the plan was to cut back the chance of LTAT not having the ability to declare a aggressive dividend charge on annual foundation over the long run.

“The minimal return that ought to be declared over time is equal to the mounted deposit charges plus 1.25% (mounted deposit charge plus 1.25%) which is believed to be a steady and sustainable dividend charge.

“We may also strengthen the LTAT funding portfolio’s capability to face up to short-term volatility within the capital markets and financial downturn in addition to making certain that the fund solvency is at an acceptable degree acceptable for a retirement fund which takes a long-term view,” he added.

LTAT’s portfolio is extremely concentrated, with 30% and 16% of about RM10bil of belongings underneath administration uncovered to Boustead Holdings Bhd and its subsidiaries and Affin Financial institution Bhd, respectively, each of which (Boustead Holdings and Affin Financial institution) are deemed extremely illiquid and never generated as a lot revenue as earlier than, in accordance with the fund.

Thus, presently, LTAT can solely depend on about 20% of its portfolio which is liquid to generate all of the revenue required to declare a aggressive charge of dividend for its members. Rehabilitating the portfolio will take a few years and remains to be a piece in progress, he mentioned.

“Sure, it has been a really difficult 9 months as a result of, on high of the focus of portfolio, we’re confronting the difficulty of Boustead Naval Shipyard and the Littoral Fight Ship undertaking which has been delayed since 2019.

“The failure to revive this undertaking can have a monetary consequence, successfully making a domino impact for the entire group that can trigger main monetary losses to LTAT and hinders our capability to supply dividend returns for the subsequent few years. That is mission-critical for us,” he defined.

Focus for 2022 – Mission 5:50

When requested about his focus for 2022, Ahmad Nazim mentioned the fund’s mission is 5:50, which implies to attain a 5% dividend payout from 2022 onwards, along with the fund’s fiftieth anniversary, which falls on Aug 1.

He mentioned LTAT is optimistic to attempt for the next dividend goal this 12 months, guided by the corporate’s strategic SAA framework, and that the fund may also deal with initiating investments in worldwide public fairness and diversifying its mounted revenue portfolio by investing in company bonds and sukuk .

“Particularly, in June 2021, LTAT made its foray into authorities bonds – the normal and important funding in a retirement fund to protect capital and supply a assured revenue stream,” he mentioned.

“Concurrently, LTAT will proceed to restructure and reposition its illiquid investments aligned to the SAA to optimize the return on the tolerable danger degree.”

In the intervening time, LTAT’s publicity to public fairness and stuck revenue stood at about 42% and eight% respectively, he added.

Requested whether or not he plans to extend mounted revenue publicity, Ahmad Nazim nodded and mentioned: “After all, primarily based on the SAA framework, we should always be capable of enhance to twenty% publicity within the subsequent few years. However the focus for this 12 months is to broaden our funding in public fairness, to incorporate worldwide markets.”

Shifting ahead, Ahmad Nazim mentioned that LTAT’s efficiency shouldn’t be benchmarked in opposition to its historic charges however have to be seen on what’s sustainable over the long run, relative to the prevailing market efficiency in addition to benchmarked in opposition to dividend charges declared by different retirement funds. — Bernama


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