KUALA LUMPUR, Nov 19 ― The Employees Provident Fund (EPF) said increased its investments abroad to 25 per cent of its total assets as it was too risky to concentrate these in Malaysia.
EPF chief executive officer Datuk Shahril Ridza Ridzuan said the RM646-billion fund’s strategy to diversify its investments over multiple industries, companies and countries allows it more stability to give better returns to its 14.2 million members.
“It is actually riskier for EPF to be 100 per cent in Malaysia. Because then you have no exposure to global growth and you are tied to just one market and your ability to diversify and generate returns will be generally impaired,” he was quoted saying in an interview published by New Straits Times (NST) pullout Business Times today.
Addressing Malaysians’ “perception or fear” that investing overseas is a “riskier” approach, Shahril said it was not true, adding that investments abroad had helped EPF’s performance in a “difficult year”.
“One of the problems is that EPF annually grows about 10 to 11 per cent in terms of size. So , the pace of growth of EPF is generally faster than the growth of capital markets in Malaysia. That’s why I think the global diversification programme which we started about five to six years ago really helped,” he was quoted saying in the same interview.
In just six years, EPF has boosted its investments abroad to 25 per cent from the initial six per cent.
Shahril credited the overseas investments with generating about 40 per cent of EPF’s total income in the first six months of this year when the fund’s local assets performed poorly amid a weak stock market and poor Malaysian bond yields.
“So it helped to compensate for the poor performance of our assets in Malaysia,” he said, calling EPF’s performance in the first half of this year “decent”.
“This year has shown that when the Malaysian equity market underperformed, we can still get the performance from other markets in the world. If all the money is invested in Malaysia, we will have a problem because our returns will be much lower,” he was reported saying.
Shahril also said EPF does not invest in assets that are “too risky” as it will affect the balance of its investment portfolio, saying that the fund uses the similar approach in both Malaysia and overseas to invest only in the “biggest companies” for shares and equities.
This meant that EPF invests in the top 180 or 190 companies on listed on Malaysia’s stock exchange, Bursa Malaysia, with these firms having “good track record of cash flow generation, dividend payment and ample liquidity in their shares”, Business Times reported Shahril as saying.
EPF also invested in blue-chip companies known for being the top shares globally, including Apple, Google and beverage giant Coca-Cola, with the former two being far greater in size to the biggest company in Malaysia, Shahril said.
Shahril also said EPF has a strong investment team built over the years that manages 90 per cent of the pension fund’s assets, with this team composed of around 300 professionals that cover all asset classes and are considered “very good”.
“We benchmark ourselves against the best in the world and when you talk to global investors, most of them recognise EPF as a global investor on the same level as global pension funds,” he said.
Despite 2015 being a tougher year than the last few years amid a largely negative Bursa Malaysia and problems in the global markets, Shahril believed that EPF should still be able to provide a real growth for contributors and achieve a reasonable return on assets this year.
In February, EPF announced a dividend of 6.75 per cent for 2014 which amounted to a RM36.6 billion payout to its members, the highest since 1999 as investment income rose by 11.66 per cent or totalling RM35 billion for 2013.
