Are your government-backed investments really that safe?

Hello Money makers,

Mrs Money and I have been offline during December due to us attending a destination wedding followed by a desert holiday in early December.  We returned back to Malaysia just in time for year end closing and season holidays.

mrs money at the desert
Mrs Money enjoying the incredible desert sunset

Nevertheless, we have been tracking our investments and following financial news during this period. My post today is a short comment on a subject that has been gnawing my mind since I first read about it, dealing with transparency and governance of government-linked investment funds.

The news about Tabung Haji and the alleged mismanagement of the fund surfaced in 2015 during the previous administration’s time, through a leaked document from Bank Negara that apparently questioned Tabung Haji on its financial strength.

Tabung Haji, similar to EPF and ASNB, are funds that are very popular among the mainstream Malaysian population. Although the purpose of Tabung Haji differs drastically from EPF and ASNB, its returns have been very impressive over many years resulting in many eligible investors tapping into it

Investments like this that attract mainstream retail investors (especially through government-guaranteed support) must accord the highest level of governance to maintain the trust among it’s investors and the general public. I have historically avoided funds due to their opaque structures and lack of clear understanding of where the high dividends are derived from. The problem is that most retail investors often save in these funds due to the explicit government backing and high returns these funds enjoy without delving into the details. Therefore, it is even more pertinent for these funds to emphasise strong governance, transparency and independence from political influence.

I recently decided to invest in ASNB so the news about Tabung Haji was a reminder on the importance to understand (or attempt to understand) one’s investments – even if these investments have backing from strong institutions or sovereign state. The Lehman Brothers crises and the drastic change of external credit ratings within a short period that followed is an important lesson to draw upon of how fast things can change even with investments with seemingly strong backing.

I am however still very confident in ASNB with one assurance being the fact that the person that already highlighted Tabung Haji’s issues back in 2015 was Tan Sri Zeti Akhtar, PNBs current chairperson. My hope is that PNB, under her leadership, will strengthen its governance and enhance its risk management to lift its funds reputation to even greater heights. As a Malaysian, and beyond my personal financial interest, I hope that the current administration can instill good governance and transparency across all institutions under its direct and indirect purview. As I write this, a press conference is held about MRB being shortchanged in a transaction involving EPF… sigh.

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