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Tabung Haji’s biggest mistake was venturing into sophisticated, high-risk investments without possessing the institutional expertise required to manage such a portfolio, economist Prof Dr Barjoyai Bardai said.
According to Barjoyai, the pilgrimage fund was never established to function as a professional investment management institution like the Employees Provident Fund (EPF) or Permodalan Nasional Berhad (PNB), yet it gradually took on that role in pursuit of higher returns.
“Tabung Haji simply does not have the expertise to undertake investments of that nature. It was never set up to become an investment management company like PNB,” Barjoyai said when contacted.
Barjoyai explained that unlike PNB or EPF, which have dedicated portfolio management teams, sophisticated risk frameworks and clearly defined asset allocation strategies, Tabung Haji lacked the institutional capability to properly manage high-risk assets such as venture capital and other speculative investments.
He said such investments are not inherently wrong, but they must form only a small component of a well-diversified portfolio.
“Venture capital investments can generate substantial returns, but they also carry equally substantial risks. Institutions like EPF invest in such assets too, but only within a carefully structured portfolio where exposure is tightly controlled.
“Tabung Haji, however, did not appear to have an optimal portfolio structure. Individual investments may have looked commercially viable, but when combined, the overall portfolio became excessively risky,” he said.
Barjoyai stressed that the issue should not be viewed as a failure of Tabung Haji’s management team alone, but rather a weakness in the institution’s overall investment strategy and governance framework.
“The management may simply have executed the decisions placed before them. The real problem lies in the investment decisions themselves and the absence of a sound portfolio management structure,” he added.
The economist also questioned whether government-linked institutions without the necessary investment expertise should continue being allowed to participate in complex investment classes.
Barjoyai said the nature of Tabung Haji’s accounts makes it difficult to conceal investment performance over the long term because the value of its assets ultimately determines the dividends paid to depositors.
While accounting treatments may temporarily shift the timing of gains and losses, he said asset values themselves cannot be manipulated indefinitely, making prudent asset management even more critical.
The government last night declassified the long-awaited Royal Commission of Inquiry (RCI) report into Tabung Haji between 2014 and 2020, shedding fresh light on the fund’s investment practices and governance issues that had sparked public debate for years.
The investigation into the Muslim pilgrimage fund was launched following allegations that Tabung Haji had overstated its financial position, declared dividends despite concerns over the true value of its assets, and departed from prudent investment practices.
You can access the RCI report here.
READ MORE: RCI Bombshell: How Did Tabung Haji Pay Bonuses While Losing Money?
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