More questions raised over ValueCap’s RM5b injection

The DAP said today Deputy Prime Minister Datuk Seri Najib Razak’s explanation that the injection of RM5 billion from the Employees Provident Fund into ValueCap Sdn Bhd’s investment fund would not be used for bailouts has raised more questions.

"With so many credible foreign and local investment and fund managers with extensive experience in the local markets, why is it that the Government is not directing funds to these institutions to 'value invest'?" asked the party’s publicity secretary Tony Pua in a statement.

The Petaling Jaya Utara MP also questioned why ValueCap, which has been unable to repay a bond amounting to RM5.1 billion that expires in March next year, was being given an additional RM5 billion.

"ValueCap is set to become one of the rare fund management companies in the world which invests with nearly 100 per cent of its investment capital sourced from loans and not from investors," said Pua.

He said the government's move to guarantee the loan to ValueCap means taxpayers would have to bear the losses should the company fail to repay EPF.

"This measure will also create a moral hazard situation whereby the fund managers will likely adopt a high-risk investment strategy since there is no ‘downside’ to the investment as the government will bail them out in the event of failure," said Pua.

He urged Najib, who is also Finance Minister, to reverse the decision to inject the RM5 billion and to pressure the EPF investment board to improve its investment returns.

Yesterday Najib gave an assurance that the allocation for ValueCap would not be used to bail out politically connected individuals or government-linked companies.

"I wish to give a categorical assurance that ValueCap will be used for value investing and will not be used to bail out anyone," he reportedly said.

- The Malaysian Insider