EPF to invest more in US

Panel talk: Shahril (left), adjunct professor of London Business School Linda Yueh and moderator Johan Merican at Invest Malaysia 2018

KUALA LUMPUR: The Employees Provident Fund (EPF) has applied for sovereign status in the United States to gain easier access to investment opportunities in the world’s largest economy.

According to EPF chief executive officer Datuk Shahril Ridza Ridzuan, the largest provident fund manager in Malaysia has already started the application process for quite some time now, and is currently waiting for the matter to be resolved.

“I can’t remember when exactly we started the process, but it was a matter raised during the government’s last trip to Washington, and we are just waiting for the matter to be resolved soon,” Shahril said.

Speaking to reporters on the sidelines of Invest Malaysia 2018 yesterday, Shahril said the government has been talking quite closely with its US counterparts about the EPF’s application for the sovereign status, which would allow the provident fund to be more effective in investing in the US.

“That (the sovereign status) will allow us to do more in terms of infrastructure or real estate investments, which is what we are looking at,” he said.

Shahril was one of the panelists for the “Sustainability and Emerging Markets” session at the two-day annual event of Invest Malaysia.

At present, the EPF has about 30% of its total RM771bil assets under management (AUM) invested overseas. This compares with a mere 6% of its total AUM invested overseas in 2009.

During the panel discussion, Shahril noted that the US was already one of the biggest investment markets for the EPF, primarily because the US market is very deep.

He pointed out that the EPF was looking to invest more in US infrastructure to ride on the potential growth coming from the sector that has been listed as a major priority under the administration of US President Donald Trump.

Shahril said the EPF was also looking to invest more in US real estate to add more inflation-adjusted assets into its portfolio.

The US economy is expected to see higher inflation in the coming years, as the country is expected to see a resurgence of its economy, driven by the expansionary policies of the Trump administration.

The EPF aims to positioning itself to gain from such growth.

Shahril, however, noted that the US was quite wary of foreign investors participating in certain sectors of the country’s economy. Hence, the need for the EPF to get the “sovereign status”.

“They are quite cautious about foreign investors coming in. So, we’ve been trying to get the ‘sovereign status’ that would allow us to invest more in the US,” Shahril said, adding that the EPF was concurrently working with its US counterparts, including forming partnerships, for opportunities to tap on the growth potential of the country.

Meanwhile, Shahril said he would remain cautious on the local stock market’s performance in the medium term, noting that the benchmark FBM KLCI would likely correct itself after a “great start” this year.

“The market is off to a great start this year... we think there’s a bit more to go. We view the normalisation (of monetary policies) as a short-term good, as markets react to the growth story of the global economy,” Shahril said.

“However, we are slightly cautious over the medium term, as markets do tend to correct over time... as nothing goes up in a straight line forever,” he added.

Shahril reckoned there are a lot of success stories for investing purposes in Malaysia, as many companies have shown resilient growth in the past few years.

On potential capital outflows from Malaysia, especially in the midst of the normalisation of monetary policies by developed economies, Shahril said volatility in portfolio flows would actually be a good thing for the EPF.

“Portfolio flows come and go, as they are always chasing for (quick) returns. We need to differentiate that from long-term capital flows, which are more important for our economy,” Shahril said.

“Volatility in portfolio flows is actually great for the EPF as a long-term investor in Malaysia’s equity... we have never been worried too much about this,” he added.

According to Shahril, while Malaysia has enjoyed significant portfolio inflows in recent months, there would be a point when investors would think that the ringgit had reached an inflexion point and that would be the time when the local market sees some outflows.