EPF targets 10% minimum internal rate of return

EPF Chief Executive Officer Datuk Shahril Ridza Ridzuan

KUALA LUMPUR: The Employees Provident Fund (EPF) is targeting a minimum internal rate of return (IRR) of at least 10% for its investment in infrastructure assets such as toll highways, power plants and ports.

The pension fund’s chief executive officer Datuk Shahril Ridza Ridzuan said the EPF was always on the lookout for new assets to acquire, including infrastructure assets.

“If you look at the types of assets that we have been investing in, they would typically have an IRR range of between 10% and 13%, depending on the risk profile of the assets, the tenure of the concessions and the security of cashflows

“For instance, a power plant asset which has secured power purchase agreements would be in the lower range, while something that has a bit more revenue volatility would be in the higher range,” he said.

Shahril was speaking to reporters after the launch of the EPF e-Caruman Contribution Payment Transformation Programme initiative.

He said the EPF remained confident of achieving its targeted returns despite the prevailing challenges in the local and global markets.

“In the current economic climate globally and domestically, members should expect that all funds would have a more difficult year,” he said.

Compared to the past, EPF investments for direct ownership in infrastructure assets come amid low returns in the stock market and a low-yield interest rate environment due to the expected prolonged slowdown in economic growth globally.

In September, Shahril was quoted as saying that the EPF planned to invest more in private equity, property and infrastructure assets so that they account for 10% of its total assets compared to 6% presently, Bloomberg reported.

The EPF currently has almost RM700bil in funds under management mainly invested in equities and fixed-income instruments.

The fund reported a 26% drop in investment income to RM8.44bil during the second quarter ended June 30, 2016, owing to weaker equity prices.

It had previously acknowledged that maintaining returns from its fixed-income investments would be a major challenge due to the low interest rate environment.

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