PETALING JAYA: The Employees Provident Fund (EPF) reported a 5.13% increase in investment income to RM12.95bil in the third quarter ended Sept 30, 2017 (3Q17), the smallest quarterly growth so far this year.
EPF deputy chief executive officer (investment) Datuk Mohamad Nasir Ab Latif said the fund’s overall portfolio performance had benefited from the rally in the overseas equities markets in the quarter.
“However, we did not see similar returns from the domestic equities market as the FBM KLCI performance was flat compared with other markets, which recorded between growth between 2% and 5%,” he said in a statement yesterday.
The country’s biggest pension fund also recorded a net impairment of RM791.55mil in the quarter under review, more than double the RM349.59mil seen in Q3’16.
This was due to the higher provision made for domestic equities in the telecommunications and oil and gas sectors, it said.
In 3Q17, equities, which made up 41.86% of the EPF’s total investment assets, contributed RM7.91bil or 61.09% of the total investment income.
The EPF said the income recorded was 12.75% higher than the RM7.02bil recorded in the corresponding quarter in 2016.
As at September, a total of 50.45% of the EPF’s investment assets were in fixed-income instruments, which generated RM4.49bil or 34.63% of the total quarterly investment income.
Of the RM4.49bil, Malaysian government securities (MGS) and equivalent made up RM2.17bil, up 10.96% or RM213.98mil from a year earlier, in line with the growth of the portfolio.
Loans and bonds, however, generated a lower investment income of RM2.32bil against RM2.56bil in 3Q16, the fund said.
Investments in money market instruments and real estate and infrastructure each represented 3.53% and 4.16% of total investment assets, respectively.
“They contributed an investment income of RM274.27mil and RM263.83mil, respectively, in 3Q17.
“Our current investment in money market instruments is above the targeted 3% under the Strategic Asset Allocation due to ongoing regulatory restrictions in new overseas investments.
“Over the long run, the EPF must continue to expand our foreign assets portfolio as it is key to our diversification and allows us to meet our return targets,” said Mohamad Nasir.
As at Sept 30, 2017, the EPF’s overseas investments, which accounted for 30% of its total investment asset, supplied 48% of the total investment income during the quarter.
“Diversification into different asset classes in various countries and currencies had helped the EPF to record higher income for the quarter, despite a significant difference in market performance globally,” the fund said.
Of the total RM12.95bil investment income for 3Q17, a total of RM860.83mil was allocated for Simpanan Shariah, which derives its income solely from its portion in syariah assets, while RM12.09bil in income was allocated for the conventional accounts, which is generated by its share of both syariah and non-syariah assets.
The value of EPF investment assets reached RM771.2bil, a 5.48% or RM40.09bil increase from RM731.11bil as at Dec 31, 2016.
Of the total investment assets, a total of RM370.10bil, or 48%, were in syariah-compliant investments and the balance in non-syariah assets.
“We still have one more quarter before year-end and we are confident that our diversification into various asset classes will enable us to meet our real dividend target of at least 2% above inflation over a three-year rolling period, for both Simpanan Shariah and Simpanan Konvensional,” said Mohamad Nasir.