Why HRD Corp lost RM85.8 mil
The Human Resource Development Corp (HRDC) in Malaysia suffered significant financial losses due to a flawed hedging strategy involving quoted shares. The agency used a structure that capped potential gains while exposing the fund to unlimited downside risk if the vendors defaulted on their obligations.
Why it matters
This highlights a major governance and risk management failure in a government agency responsible for public funds, leading to a significant deficit.
BURSA SGX Home Edge Weekly Make The Edge Malaysia your preferred source on Google This article first appeared in The Edge Malaysia Weekly on July 13, 2026 - July 19, 2026
BUY quoted shares and hedge the exposure risks with a put and call option. If the share price falls below your cost, you can sell the shares back to the original vendor at cost plus an 8%-to-8.5% premium in a year’s time. Conversely, if the share price rises, the vendor can buy the shares back at cost plus an 8%-to-8.5% premium annually at any time.
In other words, you cover your downside risks and make an 8%-to-8.5% annual return on the investment — regardless of whether the company does well and whether its shares go up or down.
Sounds like a good deal? Not if you understand how the scheme really works.
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