KUALA LUMPUR, 9 June 2023: The Employees Provident Fund (EPF) recorded investment income of RM15.16 billion for the first quarter ended 31 March 2023 (Q1 2023), an increase of 3% from the RM14.77 billion recorded in the corresponding quarter in 2022. The amount was after netting off listed equity write downs recorded for the quarter.

 

EPF Chief Executive Officer Datuk Seri Amir Hamzah Azizan said, “Despite the challenges in the first quarter of 2023, marked by persistent supply-chain disruptions and elevated financial vulnerabilities, including the collapse of Silicon Valley Bank and Signature Bank in the United States, the EPF managed to sustain its consistency of performance for the quarter. This can be attributed to the continuous healthy returns recorded by global equities in the reporting period that was buoyed by expectations of a shallow recession in the developed markets and rising optimism over China’s reopening.

 

“While returns have been positive so far this year, financial markets have remained volatile, with geopolitical tensions and high inflation continuing to be key concerns for major markets worldwide. In response to the situation, the EPF has focused its equities portfolio strategy towards resilient and fundamentally sound companies with stable dividend payout.”

 

During the quarter under review, income from Equities increased to RM8.96 billion, after netting off write downs, compared to the RM8.75 billion  recorded in Q1 2022. The asset class remained the top income contributor at 59% of total investment income.

 

Write downs for Q1 2023 were minimal at RM0.44 million compared to the RM1.09 billion recorded in the same quarter of 2022, attributed to active portfolio management by EPF fund managers. Cost write down is an internal policy adopted by the EPF on its Listed Equity investment as a prudent measure to ensure its portfolios remain healthy.

 

Fixed Income instruments, which serves as capital preservation, have been the anchor for the EPF, providing a steady stream of income and mitigating the impact from short-term market volatility to the EPF’s overall income. This asset class, comprising Malaysian Government Securities and Equivalent (MGS), as well as Loans and Bonds, contributed 32% or RM4.79 billion to investment income for Q1 2023. Both MGS and Government Investment Issues (GII) rallied during the quarter as overall benchmark yields declined with easing inflationary expectations in the US, providing opportunity for the EPF to capitalise on trading gains.

 

Real Estate and Infrastructure registered an increase in income to RM0.92 billion in Q1 2023. Similarly, income from Money Market instruments rose to RM0.49 billion, from RM0.28 billion in Q1 2022, in line with the return expectations set for these asset classes.

 

EPF’s overall investment assets as at March 2023 grew to RM1.04 trillion, of which overseas investments account for 37% of the total assets. The EPF’s overseas investments, which were mainly in equities, continued to outperform and add value to the EPF’s overall return as they generated RM7.04 billion in income, representing 46% of the total investment income recorded.

 

Meanwhile, the EPF’s domestic investments account for 63% of total asset that are mainly invested in Held-To-Maturity Fixed Income instruments, continued to provide long-term income stability through interests and profits. The EPF remains dedicated to supporting and contributing to the growth of home economy, by continuing to allocate more than 70% of its new investment annual allocation to the domestic market.

 

A total of RM13.33 billion out of the RM15.16 billion investment income was generated for Simpanan Konvensional, and RM1.83 billion for Simpanan Shariah. Simpanan Shariah derives its income solely from its portion of the Syariah portfolio while income for Simpanan Konvensional is generated by a share of both the Syariah and Conventional portfolios.

 

 

EPF not tempering expectations, fixes focus on performing sectors

Advanced economies are projected to record a slowdown in growth compared to their emerging and developing market counterparts due to several factors, including elevated global inflation and continuing geopolitical tensions. Although Malaysia’s economy is projected by Bank Negara Malaysia to grow at a slower rate of 4.0% to 5.0%, lower than the 8.7% registered in 2022, the EPF is not tempering its expectations as it believes there are performing sectors that the fund can capitalise on.

 

Datuk Seri Amir Hamzah said it is essential for the EPF to consider the broader market dynamics in order to comprehensively improve its prospects of providing a consistent dividend to its members. The remaining quarter will see the EPF focusing on industries and sectors that are expected to recover after three years of the pandemic, which he added would result in higher labour demand.

 

“As Malaysia continues to increase its economic recovery efforts, we are seeing a steady uptick in Malaysia’s labour force participation rate that will create a solid foundation for sustaining consumer spending and economic development. The EPF’s membership data, which shows a continuing increase in the number of members and employers registering with the EPF, supports the notion that labour demand in the country has indeed improved,” he said.

 

As at March 2023, the EPF recorded new member registrations of 116,423, bringing the total number of EPF members to 15.79 million. Out of that amount, a total of 8.45 million were active members , which now represent 50% of Malaysia’s 16.81 million labour force . New employer registrations also showed strong growth of 24,281 during the period, bringing the total number of employers registered with the EPF to 595,730. Total contributions received increased from RM21.55 billion in Q1 2022 to RM25.83 billion in Q1 2023, the highest quarterly contributions to date which surpassed the pre-pandemic figures (see Chart 1).

 

Malaysia’s steady recovery in labour market conditions and ongoing policy support helped the EPF to record a better active-to-inactive member ratio, which jumped from 51:49 in Q1 2022 to 53:47 in Q1 2023, from the total number of active members of 8.45 million against the total number of members at 15.79 million.

 

Datuk Seri Amir Hamzah said despite the positive trend in membership growth and improving labour market conditions, the EPF remains concerned over the future wellbeing of the remaining more than 40% of the Malaysian workforce that are still not covered by any form of social protection. To address the matter, the EPF is taking steps to enhance coverage of the country’s labour force through i-Saraan, which has been designed to allow workers in the informal sector or with no formal income to save for their retirement with the EPF. Throughout Q1 2023, i-Saraan recorded new registrations of 62,952, raising the total number of i-Saraan members to 997,659, representing an increase of 67% from the 598,874 in the corresponding quarter last year.

 

“The EPF continues to enhance its capabilities to meet the evolving needs and expectations of members and employers, as well as building up on its portfolio performance. This commitment has been the driving force behind our sustained performance, as we remain guided by our long-term Strategic Asset Allocation (SAA) that has enabled us to achieve our mandate and strategic targets,” said Datuk Seri Amir Hamzah.

 

 

TABLE 1: EPF Q1 2023 Results

Portfolio	Asset % of total investment asset	Investment Income (RM billion)	As % of income
Equities	43%	8.96	59%
Fixed Income Instruments*	47%	4.79	32%
Money Market Instruments	4%	0.49	3%
Real Estate and Infrastructure	6%	0.92	6%
Total	100%	15.16	100%

* Contributions from Malaysian Government Securities & Equivalent, Loans and Bonds

 

CHART 1: TOTAL CONTRIBUTIONS RECEIVED 

Issued by the EPF Media Desk 
Corporate Affairs Department
9 June 202