PETALING JAYA: The Employees Provident Fund (EPF) has cautioned that its strong first-quarter financial year 2026 (1Q26) performance is unlikely to be sustained through the rest of the year, as the investment income was boosted by portfolio timing decisions amid heightened global volatility.
Chief executive officer Ahmad Zulqarnain Onn said the provident fund had “frontloaded” gains at the beginning of the year by realising investment income ahead of anticipated market turbulence.
“Our portfolio managers frontloaded income that would otherwise have been spread across the full year,” he said in a statement reporting the fund’s 1Q26 performance.
“Members should not extrapolate this quarter’s result, as it is unlikely to be repeated in subsequent quarters.”
Ahmad Zulqarnain added that the fund remains focused on long-term sustainable returns rather than short-term peaks.
The caution came after EPF posted a 51% year-on-year jump in total investment income to RM27.73bil in 1Q26, compared with RM18.31bil in the previous corresponding quarter.
The figure includes unrealised mark-to-market gains and losses, particularly from foreign exchange movements, which EPF said are consistent with previous reporting periods.
By savings category, total investment income from conventional savings stood at RM22.63bil, while syariah savings contributed RM5.1bil.
EPF’s total investment assets rose to RM1.44 trillion during the quarter, with 36% invested overseas.
The fund’s international investments contributed RM15.36bil, or 55%, of total income.
Its portfolio allocation comprised 46.1% fixed income, 45.1% equities, 5.9% real estate and infrastructure, and 2.9% money market instruments.
By asset classes, equities remained the dominant driver, contributing RM20.34bil or 73% of total income, nearly doubling from RM10.80bil in 1Q25.
EPF said the strong equities performance was supported by a broad rally in early 2026, before momentum faded in March amid escalating geopolitical tensions.
Fixed income instruments contributed RM6.76bil, or 24% of total income, supported by Malaysian Government Securities and global bonds, providing stable returns amid market volatility.
Meanwhile, real estate and infrastructure generated 1% of total income or RM190mil, while money market instruments contributed RM440mil, or 2% of total income.
Looking ahead, economist Yeah Kim Leng warned that global growth is being tempered by elevated oil prices and ongoing uncertainty in the Middle East.
He said this leaves financial markets increasingly vulnerable to supply-side shocks.
“The situation remains highly uncertain and reflects the fragility of the global economy,” he said, adding that financial markets are likely to mirror this volatility.
He said the next one to two months would be a critical period for global markets, particularly given concerns over potential disruptions to oil flows through the Strait of Hormuz, a shipping route that accounts for about one-fifth of global oil supply.
“With global oil inventories already falling sharply, any prolonged disruption to the Strait of Hormuz would badly hit the global economy,” he noted.
He warned that in a severe scenario involving major oil supply disruptions, financial markets could see sharp corrections, as equities typically act as leading indicators of economic downturns.
At the same time, he said equity markets have been supported in the near term by strong gains in artificial intelligence-related stocks, but cautioned that valuations have risen to elevated levels and could be vulnerable to correction.
On the fixed income side, he flagged that persistent inflationary pressures could keep interest rates on hold, or even higher, limiting potential returns from bonds.
Despite the cautious backdrop, he did not rule out stronger performance for EPF if geopolitical tensions ease.
If there is an early resolution to the Middle East conflict, he said, a “risk-on” environment could emerge, boosting investor confidence and driving a broad-based rally in financial markets.
“In that scenario, we could see markets turning significantly more bullish as confidence returns,” he said, adding that the trajectory of global markets would largely depend on how geopolitical developments unfold in the coming months.
For context, EPF recorded a total investment income of RM79.15bil in 2025.
Meanwhile, EPF’s Ahmad Zulqarnain cautioned that the environment ahead remains “challenging”, with heightened geopolitical tensions, rising oil prices and renewed inflationary pressures expected to weigh on performance in the coming quarters.
He said the fund had entered the period of uncertainty from a position of strength after taking early portfolio actions, but stressed that capital preservation and disciplined deployment would now be the key priorities.
“We entered this period of uncertainty in a position of strength because we acted early,” he said.
“Our priority now is capital preservation and disciplined deployment to ensure the adequacy and sustainability of retirement savings for our 18 million members over the long term.”
In 1Q26, EPF registered 220,925 new members, up from 141,605 in 1Q25, bringing total membership to over 18.32 million, compared with 16.31 million a year earlier.
Active members rose 12.3% year-on-year to 10.81 million, with the active-to-inactive ratio improving to 59:41.
Active members refer to those who have made at least one contribution in the past 12 months.
Active employers, meanwhile, increased 4.2% year-on-year to 642,609 as at March 2026, following 19,956 new registrations during the quarter.
Total voluntary contributions from members rose 13.3% to RM38.01bil in 1Q26, from RM33.54bil in the same period last year, while contributions received during the quarter alone stood at RM8.83bil.
