KUALA LUMPUR: The Employees Provident Fund (EPF) has dismissed suggestions that its massive assets could be used to help troubled government owned companies.
“If you actually look at the track record of EPF, we do not bail out people or companies,” its chief executive officer Datuk Shahril Ridza Ridzuan said in an interview with StarBiz.
Shahril said the fund, which manages RM636.5bil in assets, is always on the lookout for good investment opportunities and all its investment decisions goes through its independent investment committee for evaluations.
“There is no issue about directive or instruction from the Government with regard to our investment decision,” Shahril said.
There has been speculation that the Government is looking to buy back prime development land in Sungai Besi and the Tun Razak Exchange (TRX) that were sold previously to 1Malaysia Development Bhd. (1MDB).
Last month, the Finance Ministry (MoF) had appointed CIMB Investment Bank Bhd to look for potential buyers interested to acquire 1MDB’s power assets but later reversed that decision without providing much detail.
1MDB which is bogged down by cash flow constraints due to its debts that amounted to RM41.9bil, has already said in its strategic review that it was looking at sales of some non-core assets. It has said the TRX and Bandar Malaysia projects would continue to be held by the Government.
This has raised speculation that government controlled funds may take up stakes in the projects, a move that will help 1MDB monetise its most valuable assets that it acquired from the Government a few years ago at relatively cheap prices.
“Our investment panel is independent and investment decisions are done professionally,” Shahril assured.
EPF’s current seven-person investment panel consists of one representative each from MoF and Bank Negara. Shahril also sits on the panel, together with EPF chairman Tan Sri Samsudin Osman.
Others on EPF’s investment panel are CIMB Group chairman Datuk Seri Nazir Razak, former Bursa Malaysia chairman Datuk Mohammed Azlan Hashim and David Lau Nai Pek, who has more than 35 years professional experience in finance including a 30-year career at Shell Group.
In its latest annual report, the EPF said it had begun exploring other investment assets such as real estate and infrastructure, which had proven to be effective inflation hedging tools.
The EPF had previously bought from the Government a large tract of development land belonging to the Rubber Research Institute Malaysia and teamed up with UEM Group Bhd to acquire PLUS Expressways Bhd.
The involvement of public pension funds in 1MDB has come under public scrutiny after it was revealed that Retirement Fund Inc (KWAP) had given a RM4bil loan in 2012 to SRC International Sdn Bhd, a former subsidiary of 1MDB that is now taken over by MoF.
In an interview last week, KWAP CEO Wan Kamaruzaman Wan Ahmad said that while the risk of the 10-year loan is fully mitigated by a government guarantee, the reputational damage that was done by the transaction was a lesson learnt for the fund.
Indeed, pension funds around the world are under increasing pressure to adopt the highest standard of corporate governance.
To avoid future conflict of interest, Shahril said EPF was in “discussions” with authorities about the possible removal of the representative from Bank Negara from its investment panel.
This is following a move by KWAP, which had proposed to drop Bank Negara’s representative from its investment committee.
“There is actually a good reason for the proposed removal. As a regulator, there is a huge conflict of interest issue when you are also involved in investment-making decisions,” Shahril said.
For instance, the EPF was in a complicated position last year during the failed merger involving CIMB, RHB Capital Bhd and Malaysian Building Society Bhd.
The fund is a substantial shareholder in all three financial institutions.
“We have a duty to protect our members in making our investment decision,” Shahril said.
Shahril joined EPF in December 2009 as deputy CEO (investment) and was promoted to CEO in April 2013. Prior to joining EPF, he was the managing director of Malaysian Resources Corp Bhd.
Over the past five years, the EPF had substantially increased its investment overseas from 6% of total assets in 2009 to 23% at the end of last year.
The bold shift had benefited the fund and its 14.2 million members.
“Global assets outperformed tremendously, significantly helping us to increase dividends for our members,” Shahril said. Dividend declared in 2014 was 6.75%, the highest since 2000.
The fund continued to do “quite well” in the first quarter of 2015, Shahril said, again thanks to soaring equity prices in the United States and Europe that helped offset some of the weakness in the local market.
EPF will release it latest quarterly performance next month.