KUALA LUMPUR : The Employees' Provident Fund (EPF) does not rule our higher dividends going forward should the FBM KLCI recover after three years of underperformance.
“The main reason that the EPF are paying lower dividends than in 2015 is due to increased impairments. If Bursa Malaysia turns around this year, then the impairments will go down and if our investment income remains stable or grows, I think we will be quite OK for this year,” said the EPF's chief executive officer Datuk Shahril Ridza Ridzuan during a media briefing on the fund's 2016 financial performance in Kuala Lumpur today.
On Feb 18, the EPF declared a dividend rate of 5.7% for 2016, with the total payout amounting to RM37.08bil.
While the figure represents the lowest dividend rate since 2009, it is important to note that the fund's investment income as well as its asset base have grown substantially over the nine-year period.
42% of the EPF's total investment assets of RM731.11bil are invested in equities, the bulk of which are in Bursa Malaysia stocks.
The benchmark index fell 3% last year and underperformed global markets. This resulted in an equity impairment amounting to roughly RM5.88bil in the EPF's books last year.
Nevertheless, equity investments contributed RM26.85bil or some 57% towards the fund's total gross investment income in 2016.
The fund recorded RM46.56bil in gross investment income last year, or an increase of 5.25% compared with RM44.23bil in 2015.
This represents the biggest gross investment income ever recorded since the establishment of the EPF in 1951 and the amount has been growing annually at 11.1% since 2001, it said.
Shahril added that the pension fund is looking into growing its investment exposure in both overseas markets as well in the real estate and infrastructure sector.
“Our key focus this year is on building our pipeline of private market assets mainly in infrastructure, property, and private equities. We feel that these instruments can provide better inflation adjusted returns which is a core target of the EPF,” he said.