Economist Yeah Kim Leng of Sunway University said this would ensure that risks are better handled, while Afzanizam Rashid of Bank Muamalat Malaysia believes it will help to build trust.
They were commenting on the investment loss incurred by sovereign wealth fund Khazanah and investment management company PNB in online fashion retailer Fashion Valet Sdn Bhd.
In a written parliamentary reply on Oct 29, the finance ministry revealed that Khazanah and PNB had incurred a combined loss of RM43.9 million from their sale of Fashion Valet.
This has led to an investigation by the Malaysian Anti-Corruption Commission.
In 2018, Khazanah paid RM27 million and PNB another RM20 million for a minority stake in Fashion Valet.
They sold their interests in the company to NXBT Partners, an investment holding company controlled by TIME dotCom Bhd CEO Afzal Abdul Rahim, for RM3.1 million at the end of last year.
Financial filings revealed that Fashion Valet had been incurring losses from 2017 to 2022.
Khazanah and PNB have said the losses are relatively minor compared to their overall portfolios, but the incident has sparked public debate about the effectiveness of their investment strategies and risk management processes.
Yeah said Khazanah and PNB should consider hiring more experts or delegating venture capital investment responsibilities to professional managers who are competent enough to handle risks, especially those associated with start-ups and smaller businesses.
“While the losses may seem small compared to the fund size, the worry is that these losses may be due to a lack of expertise, not enough due diligence, or mistakes in managing investments,” he told FMT.
Afzanizam said Khazanah and PNB should share details about the committees and research teams involved in making decisions on investments and how they monitor these investments.
“Explaining these processes to the public could help build trust and show that they make decisions carefully,” he told FMT.
Afzanizam acknowledged that not every investment will succeed, but stressed the need to have a clear, structured process in place to minimise losses.
He said sharing some of these processes, without necessarily revealing everything, could reassure the public that the funds are being managed responsibly.
Yeah said Khazanah and PNB should look to global funds in other countries like Norway and New Zealand for guidance on handling similar situations.
“Using some of the practices from the Santiago Principles, which promote transparency and good governance, could help increase public trust,” he said, referring to the set of governance guidelines for sovereign wealth funds formulated by the International Forum of Sovereign Wealth Funds.
However, Yeah said, harsh measures such as salary cuts, similar to those imposed by Singapore’s sovereign wealth fund Temasek following its losses with FTX, may not be necessary if Khazanah and PNB continue to perform well overall.
“It might be too harsh to cut salaries for a small loss, though public scrutiny will likely push both funds to exercise more caution moving forward,” he added.