By Chan Quan Min
Billions in borrowed money parked in the Cayman Islands and other locations gave a return on investment of only 3.3% last year, 1Malaysia Development Bhd’s annual report for the year ended March 2014 shows.
The strategic investment fund’s annual report revealed that over RM13.4 billion in investments in financial products gave a dividend income of just over RM437 million for the financial year ended March 2014.
At the same time, practically risk-free investments in fixed deposit or government bonds would have given the fund a similar rate of return without the foreign exchange risk.
Of the RM13.4 billion in financial investments reported by 1MDB, about RM7.7 billion was held in a specific type of structured investment company called a Segregated Portfolio Company (SPC) located in the Cayman Islands, a known tax haven.
Hong Kong-based Bridge Partners was identified as the fund manager of the SPC earlier this year in May.
1MDB has promised to repatriate the Cayman Islands funds by the end of the year.
The remaining RM5.1 billion is described only as amounts placed in “various investment portfolios under custody of a licensed financial institution.”
The entire amount of RM13.4 billion in financial investments is classified in 1MDB’s accounts as assets ‘available for sale,’ meaning they were purchased with the intent to sell before maturity as opposed to assets held to maturity or held for trading.
1MDB’s financial investments, as ‘available for sale’ assets, are not “designated on initial recognition as at fair value through profit or loss.”
The reported use of the dividend income is to repay interest on debt, working capital and deposit refunds to Aabar Investments PJS of Abu Dhabi.
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