THE recent fire sale in Fashion Valet by two government-linked funds has all the components of a great drama. There are allegations of corporate hijinks, of being free and easy with public funds, of cables and connections and conspicuous flaunting of affluence.
And of course there are the handbags. Yes, it must be handbags as the telltale evidence of living large. Over social media, some were extrapolating the value of Datin Vivy Yusof’s handbags, from postings allegedly of her wardrobe.
Vivy is one half of the husband and wife team behind Fashion Valet that convinced both Khazanah Nasional Bhd and Permodalan Nasional Bhd to invest RM43 million, which would have valued the company at over RM300 million. Both later sold them for less than 10% of the amount invested.
While much of the reactions over the sale are expected – Why did they invest in Fashion Valet? Were they investing in the business, or was it the people behind it? Why fashion, and what do they know about fashion? There must be other more deserving businesses?
Why them? Why not me? Yes, there was also a hint of jealousy there.
Fashion Valet is still a great study in marketing. It is a lifestyle brand with a religious twist; semi-high end niche market for Malay-Muslims crying for a brand. It is aspirational, rather snobbish, and not price sensitive. It was one of the first to create a market when there was none, hence its attractiveness as an investment destination.
A thousand ringgit scarf, for instance, to be modest! Ahh, the irony screams. Here lies the rub. When you spend all your time to be beyond the unwashed, the fall from grace could be hard. Less people would be charitable, and even being gleeful to your downfall.
One can’t say that the outrage that followed the Fashion Valet fiasco is appropriate and justified, or not, but surely there has to be some reckoning on the losses. At the moment, at least publicly, there seems to be none.
I am less disturbed by PNB since it is using its own fund generated from commissions it got from years of managing billions in investment. PNB has also been rather transparent given that it publishes reports of all its funds performance, and it delivers periodical dividends to unit trust holders.
However, Khazanah manages a fund that seemingly belongs to the country, to us. Yet, there is little known of what it does and at times it does seem to look askance at any suggestion of being more accessible to the public.
Hence, it had been the Ministers of Finance I and II briefing Parliamentarians and the public over Khazanah-related issues, such the privatisation of the company managing our airports or the performance of the national carrier or the aforementioned Fashion Valet.
Investing in a business that ends up losing money is not unique, nor is it a crime. Most institutional investors would be happy if they got a couple of successes for every 10 investments, for example.
It is a fact that Khazanah and PNB can show the billions they made over the years, re-affirming their great hit rates that clearly dwarfed losses in a fashion startup. Are we supposed to not get too excited about a smallish issue?
Also, while the loss in FV is unfortunate, criticisms and questions cannot be dismissed by suggesting that people are too dense to understand the nature of business or investments. Even if they don’t, shouldn’t both Khazanah and PNB try to enlighten them?
In this politically-supercharged environment, would it not be obvious that such losses could be used as grist for the political wheel. There should not be any elegant silence, to quote someone, if the fallout were to land on someone else’s head.
While business failures are normal, they should not be normalised.The pandemic Covid-19 was bad for the economy, but one should not hang one’s hat on that explanation alone since the whole world was affected, too.
What institutional investors like Khazanah and PNB can do, if I may suggest, is to explain its decision-making as much as it can, and why investments were made in some and not in others. It may be bothersome and tiresome, but we are talking about public accountability.
For instance, over the years Khazanah has spent billions on national carrier Malaysia Airlines, via multiple bailouts, capital injections, and restructuring efforts. Perhaps it has been tasked to do so, but that does not preclude it from scrutiny.
It is a fact that the unfortunate loss of planes, changes in the aviation industry, and the dreaded Covid, contributed to the poor results. Nevertheless, while they are valid explanations, they cannot be used as excuses for instance for the fund to tolerate the years of poor performance, and by extension the people running and governing it.
I am not suggesting that it is symptomatic, nor inappropriate-ness, but one could easily be led to conclude that there is little moral hazard and accountability to decisions gone sour.
Ironically, I am less inclined to blame the husband and wife team at Fashion Valet, but instead more on the people entrusted to keep an eye on their investments. – November 28, 2024
Veteran newsman Datuk Zainul Arifin is the Chief Executive Officer of Big Boom Media which publishes Scoop