KUALA LUMPUR: The Employees Provident Fund (EPF) is looking at carving out an estimated RM100bil to RM120bil from its investment funds to invest in syariah-compliant stocks and, in the process, offer its members the chance to participate in such a fund.
The fund will be launched by January next year.
Deputy CEO (Investment) Datuk Mohamad Nasir Ab Latif said the framework was being set up for this and that the pension fund, which invests on behalf of its members, was in the process of identifying companies to invest in.
“It will be opened to all but will be on a first come first served basis because I don’t think we can accommodate everyone at the start,” he said to selected media here yesterday.
The pension fund has total investment assets of about RM685bil currently.
“Our challenge will be when too many members ask for it and we do not have enough (syariah-compliant) assets. But as we go along, we can increase the size of the funds invested in such stocks,” he said.
“At the moment, we are not syariah-compliant because you must remember that our members cut across race and religion.
“But we listen to our members and there is a huge demand by certain quarters for syariah-compliant accounts, so that’s why we are doing this. We are not syariah-compliant now but we remain an ethical investor,” he said.
Mohamad Nasir pointed out that historically, the pension fund had never invested in gambling or alcohol stocks despite being non syariah-compliant.
“In fact, today, we no longer invest in tobacco stocks as well but we have kept whatever we have,” he said.
The EPF currently still has close to a 7% stake in cigarette company BRITISH AMERICAN TOBACCO (M) BHD (BAT).
“When we feel that the stock has reached its full potential, we will exit it,” he said, giving no indication of a timeline for this. BAT fell 3% at yesterday’s close to RM56.20.
Mohamad Nasir also said that the EPF took into account environmental, social and governance practices when it considered a company for investment.
“The corporate social responsibilty of a company is also important. Although it is intangible, we take it into account when accessing companies.”
Any company which is involved in gender discrimination, child labour or does not adhere to environmental friendly practices will not be invested in.
As for itself, the EPF, Mohamad Nasir said, had to be “whiter than white”.
Towards this end, the EPF has a well-represented board, is audited on a monthly basis and makes quarterly announcements.
“All these is to ensure that we have proper governance and there is no monkeying around.”
He stressed that the EPF had a very prudent investment process and was well diversified in its investments.
“If you look at our asset allocation, slightly more than 50% is in fixed income, that is the anchor. Beyond that, we invest in equities, real estate, private equity ... infrastructure.”
He said preservation of capital was the fund’s key criteria and it tried to avoid investments which had no proven track record.
“We would rather go into established companies because we are a retirement fund and cannot take on too much risk.”
Having said that, he said pension funds’ investment strategies do evolve over time.
“But as of today, I haven’t even filled up my asset allocation for real estate, private equity or infrastructure. I would rather concentrate on these which give reasonable returns for now.”
Meanwhile, when asked for an indication of the amount of dividends to be paid out to members for the year 2015 that is due to be announced soon, he remarked that it would be “respectable”, bearing in mind that last year was a “very challenging” year.
Last year, the pension fund announced a 6.75% dividend payout for 2014, higher than the 6.35% payout it had declared for 2013.