Saying that time management is not his strongest point, the former Khazanah Nasional Chairman Azman Mokhtar dismissed the losses incurred by the sovereign funds in some of its ventures as part of the risk taking in the investment world.
He disputes the amount of the losses in the Swiss Bank UBS is not RM3 billion but RM1.7 billion.
Malaysian Prime Minister Tun Dr Mahathir Mohamad had said the losses were at RM3 billion.
“First, the losses incurred was RM1.7bn and not RM3bn as widely reported.
“Second, that at all times proper provisioning and recognition of the losses were made in line
with accounting and prudential standards with even at one point 97% provisioning made of the RM3.6bn total investments. Through diligent recovery work, more than half or 53.5% of the value of the investments or RM1.9bn were recovered.
“Third, an internal review by independent board members with inputs from KPMG found that the case was clear of wrongdoing and, investment processes and board approvals were complied with,” Azman said in his quit letter.
He said a significant factor in the losses resulted from the negligence and breach of the shareholders agreement by the fund managers, Olivant.
”This is a charge that they, through a legal process, ultimately admitted to, apologized and assumed responsibility for.
“A related matter to note is that as the matter was a legal case, legally binding confidentiality clauses effectively restricted the amount of public disclosure that could be done, notwithstanding that, the confidentiality clauses helped with facilitating an orderly recovery process.
“Hence, while the losses are indeed large, it was incurred as part and parcel of investment operations which are always subjected to investment risks which in this case many SWFs suffered much larger losses than we did on investments in global banking stocks.
“This has also to be viewed and evaluated in the context of the overall portfolio performance where more than RM82bn of net gains have been achieved over the nine-year period from 2008 to 2017 (RM33.7bn NWA in December 2008 to RM115.6bn in December 2017). In fact, as I have mentioned in our staff dialogues recently, it should be noted that our total gains over the period is roughly RM100bn (with the top ten gainers making up some RM92bn), the ten largest losses total up about RM19bn (with MAS/MAB alone at RM8.4bn, Silterra at RM5.5bn and Olivant coming in third at RM1.7bn). In investments terms, it means our gains has outnumbered our losses by a factor of 5:1. In footballing terms, it’s like winning a game 5-1 !,” he wrote.
A report in Strait Times said Khazanah had in 2008 “embarked on a highly confidential investment strategy” whereby the fund placed some of its money with experienced banker Luqman Arnold, who through his investment group Olivant, was also managing some of Europe’s top financial powerhouses.
It was dubbed as “Operation Twist”, which then morphed into “Operation Red” involving Khazanah.
Olivant and Spain’s Santander Bank as partners, acquiring 2.6 percent interest in Swiss Bank UBS.
The report said Mahathir’s critical comments against Khazanah was due to this episode.