Malaysia’s sovereign wealth fund on why it did not invest in ride-hailing giant Grab

Malaysia’s sovereign wealth fund Khazanah Nasional has defended its decision not to make an early investment in Southeast Asia’s ride-hailing and food delivery superapp Grab.

Chief Investment Officer Azmil Zahruddin told CNBC the fund’s investment strategy was to focus on large investments — not direct startup deals. 

Khazanah could not close an early deal to fund the Malaysian-founded Grab.

Other investors including Singapore’s state-owned investor Temasek eventually took a stake in Grab and the ride-hailing giant moved its headquarters to Singapore. The company went on to raise $4.5 billion and listed on Nasdaq in late 2021 through a SPAC merger with Altimeter Growth Corp, making Grab the biggest listing in the U.S. by a Southeast Asian company.

Khazanah came under criticism for what some have said was a “missed opportunity” for Malaysia.

“You have to look at what Khazanah is and what its DNA is,” Zahruddin said in an exclusive interview with “CNBC Squawk Box Asia” on Thursday. 

“Our DNA is that we manage large investments. [Venture capital] investing is not really what we do, and it’s not really our expertise and skill set.”

“So what we try to do is, instead of trying to do those investments directly, we actually seed investments into VC funds who then invest into companies around the region.”

Zahruddin agreed, however, that it was important for Malaysia to support its entrepreneurs and retain its talent. 

He said Khazanah would continue to help Malaysian startups through an indirect approach of investing into funders that take a stake in these new companies and potentially investing in them directly after they have matured to a size that meets the fund’s investment criteria. 

To that end, Zahruddin said Khazanah invested in Grab’s competitor Uber through an intermediary funder which was willing to invest in Uber at an early stage. 

Khazanah’s investment in the foreign-owned Uber instead of Grab, which was started by two Malaysians, raised eyebrows in the Malaysian investment community. 

Grab dominates ride-hailing in Singapore and operates across Southeast Asia. The company has been suffering losses since its listing last year and in its latest results for the first quarter, Grab posted a net loss of $435 million although revenue has risen to $228 million — up 6% year-on-year.

Zahruddin said the venture capital markets have been quite challenging and many endowment funds that have been active in venture capital have seen their investments fall by up to 40% in the past year. 

Khazanah posted a nearly 80% drop in annual profits in 2021 to 670 million Malaysian ringgit, or $150.36 million. The year before profits also fell about 60% to RM $2.9 billion. 

The sovereign wealth fund said the fall in profits were due to its continued extension of financial assistance to its airlines and tourism investments suffering from Covid-19 disruptions. 

Last month, Khazanah announced it would explore new investment opportunities in Turkey following a meeting between representatives from the fund and the Turkey Wealth Fund in Istanbul.