LEAP market may be a tough sell for Malaysia's biggest funds

PETALING JAYA: Companies heading for a listing on the Leading Entrepreneur Accelerator Platform (LEAP) market, launched by Prime Minister Datuk Seri Najib Abdul Razak more than a month ago, may have a tough time squeezing itself into the portfolios of some of Malaysia’s biggest funds.

The country’s largest funds, Employees Provident Fund (EPF) and Kumpulan Wang Persaraan (KWAP) or Retirement Fund Board, are governed by investment policies and guidelines which dictate permissible asset classes, strategic asset allocations, performance benchmarks and tactical limits.

Companies which qualify for a LEAP listing include those at seed or early growth with potential that lack assets for collateral and a track record. The risky nature of the investment has led Bursa Malaysia to limit the market to sophisticated investors only – defined as individuals with more than RM3 million in assets or more than RM300,000 in annual income, and corporates with net assets of more than RM10 million.

KWAP, the country’s second largest retirement fund with RM125 billion under management, for one will not be on the list of investors in the LEAP market.

In response to a query from SunBiz, KWAP CEO Datuk Wan Kamaruzaman Wan Ahmad confirmed that its risk appetite does not allow it to participate in the companies which are eventually to be listed on the new exchange.

EPF CEO Datuk Shahril Ridza Ridzuan, when queried, told SunBiz that they have an allocation for investments in small and medium enterprises (SMEs). However, the fund will have to assess companies eventually listed on the LEAP market to see whether any of them qualify.

“But I can’t say now whether there’s any because I’m not sure whether my team has started to look at those companies yet.

“We do a lot of investments. We have close to RM3 billion investments in small and medium companies in Malaysia. We’ll have a look and see whether there’s any thing (in the LEAP market) which qualifies for us,” he said when met at an event early last month.

The retirement fund has about RM731 billion under management.
According to Bank Negara Malaysia’s Financial Stability and Payment Systems Report, there was a financing gap of about RM22 billion faced by SMEs in 2015.

This gap was derived from statistics which showed the amount of alternative financing received by SMEs as opposed to total financing applications by small and medium firms. Financial institutions account for about 96% of total financing for SMEs, with the capital market providing less than 4%.

As an adviser-driven market, 20 Bursa Malaysia approved advisers will be entrusted to weed out the wheat from the chaff.

Eleven companies have thus far expressed their interest in taking the leap, with the first of such a company expected as early as at the end of the year.

KWAP and EPF’s potential disinvolvement in the market, however, is not a sign of lack of buy-in from investors. One company listed on the ACE Market for example, Asia Bioenergy Technologies Bhd, is raising funds via a rights issue to invest in companies to be listed on the market.

Associations, too, are doing their part to educate SMEs on the opportunities under the LEAP market, as evidenced by a seminar organised by the Associated Chinese Chambers of Commerce and Industry of Malaysia on the listing requirements for the LEAP market about two weeks ago.