Economists laud investment strategy that paid off

PETALING JAYA: The Employees Provident Fund (EPF) has done very well with its investment strategy and diversification to be able to deliver handsome dividends despite poor economic conditions and the spate of withdrawals, say economists.

Prof Yeah Kim Leng of Sunway University said it was a highly commendable performance especially since more than RM100bil had been withdrawn under the various stimulus packages.

“The inflation adjusted dividend rate of 3.6% is good news for the large pool of contributors.” he said.

The Malaysian inflation rate for 2021 was 2.5%.

Prof Yeah added that EPF’s good sustained performance should also strengthen confidence among contributors and encourage them to maintain their savings in the fund.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid agreed that the dividends were better than expected and was a sign of how EPF’s portfolio investment strategy had paid off.

He said EPF’s diversification into global markets had brought good returns, adding that the outlook for equities and fixed income this year would remain challenging.

Dr Afzanizam said geo-political worries, like the war in Ukraine, would also result in heightened uncertainties.

“This puts equities in a volatile position at the moment,” he said.

However, he was confident that EPF had high calibre fund managers and economists who would be able to provide the right advice when deciding on investments.

“Its strict governance on the investment process will help, too,” he said.

AmBank Group chief economist Anthony Dass said the improved dividend payout had been expected, with EPF’s resilience and its ability to capitalise on global economic recovery.

“This came from a focus towards a quality, healthy and well-diversified investment portfolio strategy,” he said.

He added that EPF’s diversification in different asset classes, markets, and currencies would have also provided income stability and added value to the fund’s overall returns.

EPF has declared a dividend rate of 6.1% for conventional savings for 2021, with a payout amounting to RM50.5bil and 5.65% for syariah savings 2021 with a payout amounting to RM6.3bil. The total payout amounts to RM56.8bil.

Last year, EPF declared dividends of 5.2% for conventional savings and 4.9% for syariah savings.

The past decade saw EPF’s dividend payout for conventional savings at 5.8% in 2010 followed by 6% (2011), 6.15% (2012), 6.35% (2013), 6.75% (2014), 6.4% (2015), 5.7% (2016), 6.9% (2017), 6.15% (2018), 5.45% (2019) and 5.2% (2020).

For syariah savings, it recorded dividends of 6.4% in 2017, 5.9% in 2018, 5% in 2019 and 4.9% last year.