Provident fund on the lookout to invest in new projects
KUALA LUMPUR: The Employees Provident Fund (EPF) is optimistic that its latest venture into the Australian property market will yield long-term returns, despite speculations that the housing sector is headed for a glut.
EPF chief executive officer Datuk Shahril Ridza Ridzuan said the project would span over 15 years.
“Australia is a market that we’re comfortable with and we’ve been there for a while already,” he told reporters on the sidelines of the IFN Forum Asia 2017, yesterday.
“For a fund like ourselves, given the long-term liabilities that we manage, the key focus for us over the past few years is to build a solid infrastructure and property assets, and in the property space we’ve very much focused on long-term assets with 10 to 20 years of yield.”
According to a recent report by the National Australia Bank, house prices has been forecast to grow 7.2% in 2017 for Australia while unit prices are forecast to increase 6.8%.
However, tighter credit and prudential conditions, large additions to the apartment stock, limitations from subdued wages growth and deteriorating affordability will likely see markets cool into 2018.
Shahril reiterated that the EPF was a long-term fund that focused on stabilised, long-term returns.
“Even in equities, which constitutes roughly 40% of our portfolio, the types of equities that we focus in are based very much on those long term yields as well.
“We invest in long-term utilities, consumer goods and matured technologies, rather than tech start-ups or the volatile equities that you see in the market.”
Shahril said the EPF’s realised return on investment over the past three years in equities had averaged between 9% and 10%.
“That’s stable even with the volatility of the market,” he said.
Last week, the provident fund announced that is paying A$154mil (RM500mil) for a 49% stake in Yarra Park City Pty Ltd (YPC), which holds the rights to a five-acre mixed-use development worth over RM9bil in Melbourne.
The remaining 51% interest in YPC is held by PJ Development Holdings Bhd (PJD), which is a subsidiary of OSK.
The Melbourne project also marked the fund’s second development venture overseas after the Battersea project in London.
Shahril said the EPF was constantly looking for new property ventures to invest in and was “always approached” by parties as potential investors.
“We are looking at projects all the time and we are approached all the time. We have a fair number of assets in Australia,” he said.
Based on reports, the Melbourne project will transform a former carpark bounded by the Westgate Freeway and Kavanagh, Balston and Power Streets in Southbank into a dynamic mixed-use community and retail centre, with an expected gross development value (GDV) of A$2.8bil (RM9.4bil).
The project comprises four towers of residential apartments, an office tower, a hotel/serviced apartment tower and multiple street-level retail lots across the various components.
Slated for residential use, the towers have a capacity of over 1,000 apartments, with a GDV of over A$900mil (RM3bil).
Separately, during a session titled “How do institutional investors continually beat the market” at the IFN Asia Forum yesterday, Shahril said the EPF would look at long-term sustainability when considering syariah and environmental, social and governance (ESG) investments.
“When we look at ESG, we’ve taken a conscious decision to focus our efforts in assets and in sectors which we believe are in line with our beliefs. We tend to avoid sectors that are injurious to public interest, such as gambling and alcohol. This is across both syariah and conventional.
“Our syariah assets today account for about 50% of our total asset base and we’ve been able to find syariah compliant assets across everything that we do, whether its infrastructure, equities, or property.”
In 2016, the EPF declared a dividend of 5.7%, lower than the 6% rate that it had been paying over the few years before that.
It also recognised net impairment amounting to RM8.17bil, compared with RM3bil in 2015 largely due to a weaker equities market and slump in crude oil prices.
The net impairment was largely to reflect lower equity prices, particularly in the domestic banking and oil and gas sectors in both the domestic and foreign markets.
Shahril said the EPF had promised an inflation-adjusted investment to its members, adding that the fund was committed to finding “the right assets to match that profile.”
“We invest in a widespread of assets and markets on a global basis. We’re now in 30 different markets and across multiple asset classes ranging from equities to fixed income. We’re a firm believer in diversifying the portfolio.”
The two-day IFN Asia Forum, which ended yesterday, served as a platform for industry professionals to discuss the latest issues surrounding the development of Islamic finance in the Asian region.