KUALA LUMPUR: The Employees Provident Fund (EPF) says it has no need to sell assets overseas for cash, as the net inflow of contributions of close to RM16bil a year is more than enough to cover for its domestic investment requirement.
The pension fund manages RM684.5bil worth of investment assets as of end of 2015.
‘We do not have shortage of money to invest in Malaysia,” chief executive officer Datuk Shahril Ridza Ridzuan said at a media briefing after unveiling the fund’s 2015 report.
“One thing about the EPF is we have a constant flow of net contributions coming in on a monthly basis. We continue to invest very heavily in Malaysian market from these flows of contributions, together with the income generated from our domestic assets,” he said.
According to the EPF’s latest annual report, gross contribution in 2015 amounted to RM60bil, but this was offset by withdrawals totalling RM44.25bil.
Last year, the total number of members increased to 14.5 million, out of which 6.7 million were active members.
Total number of employers contributing to the EPF increased to 536,489.
“For local investments its not a problem for us. We have more than enough asset coverage, more than enough contributions and domestic income to fund any kind of local investments.” Shahril said.
The government in unveiling its Budget for 2015 in September last year had urged government-linked investment companies to bring back their profits from overseas and invest in high-impact local projects.
Among those that have responded to the call were Lembaga Tabung Haji and Retirement Fund Inc (KWAP), which had in recent months sold their properties in London for hefty profits.
As it is, overseas investment made up 25% of EPF’s total investment assets. This works out to about RM171bil, which is invested mainly in equities, bonds and real estates.
He said this is a “comfortable” level for EPF compared with just 9% of its total assets in 2009.
“The whole point for EPF is to build a diversified portfolio,” he said.
Foreign investment contributed 48% to EPF’s total gross investment income RM44.23bil in 2015, according to deputy chief executive officer Datuk Mohamad Nasir Ab Latif.
“Foreign investment have worked very well for us,” he said at the briefing.
He noted that the fund has been gradually increasing allocation to equities as yields from fixed income has been very low.
“In the last few years, from 2014 to 2015, 59% of our income is from equities,” Nasir said.
He said higher income from investment had helped EPF boost its annual dividend payout last year to to 6.4%, or a total payout amounting to RM38.24bil.
The payout amount required for every one percent dividend rate for the year was RM5.98bil, which was a 10.13% higher compared with RM5.43bil in 2014.
Shahril said the fund will continue to deliver real rate of return of at least 2% above the rate of inflation.
“In the first quarter of this year, the equity market performance was very tough not only for EPF but also for any investment fund manager around the world given the high volatility and low yield.
“So we expect, with all these challenges, to continue focusing on the inflation plus 2% to ensure that we can deliver real growth for our investors and members for a very long period of time,” he said.
Bank Negara Malaysia expected inflation to grow between 2.5% and 3.5% this year.
Shahril said the fund continues to look for opportunities to increase its exposure in the “inflation assets” segment such as utilities and infrastructure.
“We’re big investors in power plants, toll highways, which provide inflation adjustment return that we’re looking for.
“We were big subscribers of Tenaga Nasional Bhd’s new issuances to support the development of new power plants,” he said.