Kuala lumpur: Lembaga Tabung Haji (TH) needs to focus on reasonable and sustainable investment returns commensurate with the level of risk that can be accepted, with the protection of the savings of prospective pilgrims remaining a priority, according to an economist. Lecturer at the Department of Economics, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia (IIUM), Associate Professor Dr Muhammad Irwan Ariffin said TH does not need to be the most aggressive fund or pursue the highest returns, but rather needs to prioritise capital protection and liquidity while generating returns in a disciplined manner.
According to Bernama News Agency, TH still needs to take investment risks because without risk, it is difficult to generate returns that can overcome inflation and support hajj operations. However, the risk needs to be controlled through portfolio diversification, exposure limits according to sectors and assets, independent valuations, and continuous monitoring. Dr Muhammad Irwan highlighted the importance of this approach to ensure TH remained stable, resilient, and consistent in generating returns without neglecting its mandate to protect depositors' savings.
Meanwhile, Dr Muhammad Irwan mentioned that TH also needed to distinguish between reasonable market losses and losses due to negligence, conflicts of interest, or decisions without sufficient scrutiny. Market losses may occur even if the investment process is well executed, but losses due to governance weaknesses should be avoidable. He pointed out key warning signs such as large investments approved without independent due diligence, overly optimistic asset valuations, over-reliance on management recommendations, and the absence of professional views from third parties.
TH also needs to avoid a large concentration of funds in a single company or sector, investments that are not in line with the institutional mandate, unavoidable conflicts of interest, and investments without a clear exit strategy. Another warning sign is when political targets or the desire to maintain a certain distribution rate begin to influence the level of risk taken. Investment decisions should not be made solely to generate short-term profits or cover financial weaknesses.
Regarding the asset allocation strategy, Dr Muhammad Irwan said it needs to be assessed periodically because market conditions, interest rates, inflation, and TH's financial needs are constantly changing. However, this assessment does not mean TH needs to change its portfolio every time the market fluctuates. From a portfolio theory perspective, TH needs to balance stable and liquid assets with growth assets that offer higher returns but have greater risk. Diversification also needs to be assessed based on actual risk, as having many assets does not necessarily mean a portfolio is diversified if they are all exposed to the same sector or economic factor.
He emphasized that every major investment needs to go through due diligence, which includes financial, legal, operational, governance, and reputational assessments. Assumptions on returns, asset prices, and market prospects need to be tested through several scenarios, including the possibility of things becoming worse than expected. Asset selection also needs to be in line with TH's mandate, risk tolerance, liquidity requirements, and liability tenure. Investment performance needs to be monitored against the original target and risk level, with clear triggers to review, reduce exposure, or exit investments if conditions change.
Dr Muhammad Irwan advised TH to pay attention to asset-liability management by ensuring that the maturity, liquidity, and cash flow of investments are matched with depositor withdrawals, profit distribution, and hajj operational needs. A portfolio that appears profitable on paper can still face problems if assets are difficult to sell when cash is needed. The goal of asset allocation is not to maximise returns in a single year, but to ensure TH is able to withstand market shocks while at the same time protecting capital and generating consistent returns over the long term.