Quora Answer: What Happened with Malaysia’s Sovereign Wealth Funds?

The following is my answer to a Quora question: “What happened to Malaysia’s sovereign wealth funds?”

Corruption first.  Mismanagement second.  A recovery since, though one still dwarfed by global peers.  Malaysia runs two entities that people conflate constantly.  1Malaysia Development Bhd., 1MDB, was a state investment fund founded in 2009 by then Prime Minister Dato’ Sri Mohammed Najib Tun Abdul Razak.  Khazanah Nasional Bhd. is Malaysia’s actual sovereign wealth fund, founded on 3^rd September 1993, a separate entity with a separate mandate.  1MDB is the reason “Malaysia’s sovereign wealth fund” became global shorthand for kleptocracy.  Khazanah inherited that reputational damage anyway, and had its own crisis to answer for besides.  Understanding what happened requires separating the two, then tracing how each one collapsed and recovered on its own terms.

How 1MDB Worked

Malaysian businessman Low Taek Jho, known as Jho Low, was not a banker.  Educated at Harrow and Wharton, he founded his own investment firm, Jynwel Capital, after graduating in 2005, and built his early standing by connecting Najib Razak to Gulf sovereign funds such as Mubadala.  That access, not a banking career, is what put him at the centre of 1MDB.  He operated as a fixer and architect rather than a financier deploying his own capital, orchestrating the offshore structures, and directing where the money went, while Goldman Sachs supplied the institutional cover his operation lacked.

Goldman raised US$6.5 billion for 1MDB through three bond offerings between 2012 and 2013, earning close to US$600 million in fees, twenty times the standard rate for underwriting of that size.  Ng Chong Hwa, known professionally as Roger Ng, Goldman’s former head of investment banking for Malaysia, and Timothy Leissner, the bank’s former Southeast Asia Chairman, both took part in the scheme.  Leissner later testified that he personally transferred US$35 million in kickbacks to Ng, and both men faced criminal prosecution.  US and Malaysian authorities determined that US$4.5 billion was diverted from 1MDB into offshore shell companies.  Low spent it on a US$250 million yacht, luxury real estate in New York, Beverly Hills, and London, paintings by Claude Monet and Vincent van Gogh, and financing for the 2013 film The Wolf of Wall Street.

Goldman ultimately paid close to US$6 billion in combined settlements with Malaysian and US authorities, one of the largest penalties in Wall Street history.  Najib Razak was convicted and imprisoned.  Low remains a fugitive, believed to be in China, a claim Beijing denies.  Low himself has disputed being the sole mastermind, telling The Straits Times in 2020 that he is “an easy target for all of those above given the fact that I am not a politician,” a claim that carries some weight given Najib’s own conviction, even if it also reads as self-serving deflection from a man still avoiding trial.

Khazanah’s Separate Collapse

Khazanah Nasional posted a pre-tax loss of RM6.27 billion in 2018, against a pre-tax profit of RM2.89 billion the year before.  Net worth adjusted fell 21.6 per cent to RM91 billion, from RM116 billion at the end of 2017.  Realisable asset value fell to RM136 billion from RM157 billion over the same period.  Even in the year Khazanah claimed a profit, its adjusted asset value had already fallen by more than a fifth.  Despite this, the fund still declared a RM1.5 billion dividend for 2018, a decision that called its management's credibility into serious question.  This was not 1MDB-style theft.  It was years of weak investment discipline and governance drift, arriving at the same moment Malaysia’s global reputation was already in ruins from a scandal Khazanah had no direct hand in.

Khazanah’s assets sat at just over US$20 billion during this period.  Temasek Holdings, Singapore’s sovereign fund, held an estimated US$250 billion at the same time, more than ten times the size, from a smaller country with fewer natural resources and a smaller domestic market.  A resource-rich nation running a fund one-tenth the size of its neighbour’s was not a funding problem.  It was the compounded cost of weak governance layered on top of a national scandal.

The Recovery, and What It Rests On

Khazanah has turned itself around since, under Managing Director Dato’ Amirul Feisal Wan Zahir.  Net asset value grew from RM85 billion in 2023 to RM103.6 billion in 2024, a 22 per cent increase, reaching total assets of RM176.2 billion by 2025, with net income of RM7.14 billion.  The fund’s one-year rolling return hit 24.6 per cent in 2024, its best on record, up from 5.7 per cent the year before.  Moody’s and S&P Global Ratings assigned Khazanah its inaugural investment-grade credit rating, A3 and A- respectively, citing a sound track record of investment and funding discipline.

The recovery is not confined to the balance sheet.  Khazanah holds controlling or major stakes in Telekom Malaysia, Tenaga Nasional, Malaysia Airports, Malaysia Airlines, and UEM Group, the backbone of the country’s telecommunications, power, aviation, and infrastructure sectors, and continues actively managing them rather than treating them as passive holdings.  It has positioned Malaysia as a leader in Islamic finance, issuing the world’s first exchangeable swukuk.  It launched Jelawang Capital in October 2024 as a national fund-of-funds to grow Malaysia’s venture capital ecosystem, and has allocated RM1 billion toward mid-tier companies in semiconductors and advanced manufacturing, alongside RM1.5 billion for energy transition projects including large-scale solar.  This is diversification, still early relative to Singapore’s own investment in the same sectors through Temasek Holdings and EDBI, but progress against a fund that was, a decade ago, defending a dividend it could not justify.

None of this recovery closes the gap against the rest of the world’s sovereign capital.  Global sovereign wealth fund assets crossed US$15 trillion for the first time in December 2025.  Norway’s Government Pension Fund Global leads that table at US$1.6 to US$2.2 trillion, holding stakes in over 7,200 companies worldwide.  China runs two funds in the top five, CIC at US$1.24 trillion and SAFE Investment Company at US$1.08 trillion.  Abu Dhabi’s ADIA sits close to US$1 trillion, Saudi Arabia’s PIF near US$925 to US$930 billion, and Kuwait’s KIA between US$846 billion and US$1 trillion.  Singapore’s GIC manages somewhere between US$769 billion and US$936 billion, and Temasek Holdings trails at US$288 billion.

Khazanah's total assets, converted from its 2025 figure, sit at US$38 billion, well outside the top thirty funds tracked globally, closer in scale to Turkey’s TVF or Kazakhstan’s Samruk Kazyna than to any of the trillion-dollar funds above it.  A country with Malaysia’s oil, palm oil, and manufacturing base sitting this far down the global table is the price for a decade of failure.

Corruption at the scale 1MDB reached does not merely cost the money that was stolen.  It costs a country its standing for years afterwards, regardless of what its actual sovereign wealth fund does to rebuild in the meantime.  To be fair, Khazanah’s post-2019 leadership has done real work: an investment-grade rating, record returns, genuine diversification, and continued stewardship of the national assets it was built to manage.  What it has not done, and cannot do quickly, is close a scale gap against Norway, the Gulf funds, China, and Singapore that took a decade of scandal and drift to open.  Malaysia had the resources to have built one of the largest sovereign funds in the world.  What it built instead was a cautionary tale, and a slow, genuine climb back out of it.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code