KUALA LUMPUR, 5 December 2022: The Employees Provident Fund (EPF) recorded a total gross investment income of RM39.31 billion for the nine months ended 30 September 2022 (9M 2022), a decrease of 18% or RM8.71 billion, compared to the RM48.02 billion recorded in the same period in 2021.

Total gross investment income for the third quarter (Q3 2022) ended 30 September 2022 amounted to RM12.32 billion, a decrease of RM1.65 billion or 12%, compared to RM13.97 billion in the corresponding period in 2021. However, this also represents an 11% improvement over Q2 2022.

EPF Chief Executive Officer Datuk Seri Amir Hamzah Azizan said, “Due to the stabilised market conditions for both equity and fixed income investments, the EPF’s third quarter performance bettered the previous quarter’s gross investment income of RM11.14 billion.

“There are ongoing concerns that high interest rates will lead to a global recession, exacerbated by continuing geopolitical risks and interest rate hikes by the US Federal Reserve. However, notwithstanding these challenges, the EPF’s disciplined investment approach, guided by its robust Strategic Asset Allocation and active portfolio management, helped to cushion the impact and allowed the EPF to deliver a steady performance driven by the strong rebound in the domestic market.”

During the quarter under review, Equities contributed RM5.49 billion, accounting for 45% of total gross investment income. Despite the heightened market volatility, the EPF managed to register a healthy quarter-on-quarter growth of 13% for the gross investment income from its equities portfolio. Private Equity, which is part of this asset class, managed to deliver favourable realised returns of RM1.09 billion or 20% of total Equities income recorded during the quarter. This portfolio is gradually becoming more important for the EPF’s diversification efforts as the volatility in listed equity markets remains high.

Fixed Income Instruments, which serves a capital preservation role, have been the anchor for the EPF and continued to provide a steady stream of income, mitigating the impact from short term market volatility and providing stability for the EPF’s overall income. This asset class, comprising Malaysian Government Securities and Equivalents, as well as Loans and Bonds, contributed 39% or RM4.77 billion, to EPF’s gross investment income for Q3 2022.

Real Estate and Infrastructure registered an income of RM1.67 billion, while income from Money Market Instruments generated RM0.39 billion, in line with the return expectations set for these asset classes.

In Q3 2022, the EPF’s overseas investments, which make up 36% of EPF total investment assets, continue to be a major contributor to income and generated RM5.28 billion or 43% of the total gross investment income recorded.

 
A total of RM1.42 billion out of the RM12.32 billion in gross investment income, was generated for Simpanan Shariah in Q3 2022, and RM10.90 billion for Simpanan Konvensional. Simpanan Shariah derives its income solely from its portion of the Shariah portfolio while income for Simpanan Konvensional is generated by a share of both the Shariah and Conventional portfolios.

Taking into account the effect of the RM36 million that was written down for listed equities during the quarter, the EPF’s total investment income in Q3 2022 was RM12.28 billion, up 37% from the RM8.98 billion recorded in Q2 2022. Cost write downs are an internal policy adopted by the EPF on its listed equity investments as a prudent measure to ensure the health of its portfolios.

As at September 2022, the EPF’s assets under management were RM961.01 billion. Despite the numerous macroeconomic challenges, the EPF’s asset growth remained healthy, as contributions received for the year as at September 2022 amounted to RM63.61 billion, holding up much better than expected.

Capitalising on Malaysia’s strong recovery
Malaysia’s strong third quarter 2022 GDP, which grew by 14.2% compared to 8.9% in the second quarter, along with a strong bounce in the labour market, indicated that the underlying economy has recovered from the pandemic, as evidenced by the positive uptrend in the FBMKLCI seen since September.

Datuk Seri Amir Hamzah said the economic recovery serves as fertile ground for investments and opportunities that will spur economic activity, jobs, and faster movement of people and goods. He added that this would be an opportune time for institutional investors like the EPF to reconfigure its business strategy to position for short-term endurance along with long-term resilience and growth.

“From an investment standpoint, the EPF remains resilient and focused on what we can control, namely asset allocation, costs, and an overarching strategy that emphasises long term sustainability of our investments and returns, in line with our Strategic Asset Allocation.

“Though the uncertainty revolving around international markets continues to be a strong concern, we are taking a ‘cautiously optimistic’ stance as we are not ignoring indicators that may suggest improvement in the macroeconomic outlook such as the possible peak in global inflation and the Fed’s hints that interest rate increases will begin to slow in the coming months.”

Continuous improvements in active membership base
The EPF continues to record strong growth of new member registrations at 510,354 for the period from January to September 2022, adding to the total number of EPF members as at 30 September 2022 of 15.61 million. Out of that amount, a total of 8.26 million were active members¹, which now represent 50% of Malaysia’s 16.44 million labour force as at September 2022².

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 to 53%:47% as at September 2022, from the total number of active members in Q3 2022 of 8.26 million against the total number of members at 15.61 million.

In order to achieve its coverage target of more than 60% active members of the labour force by 2025, the EPF intensified its outreach programmes and proactive stakeholder engagement, powered by digital technologies that enable members to access more of EPF’s services such as registration and activation of i-Akaun, i-Saraan, and Simpanan Shariah.

Datuk Seri Amir Hamzah said this digital capability helped strengthened the foundations of EPF’s operations, enabling the fund to provide better services and add value to EPF members, while also helping to boost the take-up rate for both EPF voluntary contribution programmes.

From January until September 2022, the new registrations for i-Saraan increased to 445,193 from 27,048 during the same period last year; while new registrations for Kasih Suri Keluarga Malaysia KWSP increased from 2,216 to 43,666 for the same corresponding period. i-Saraan is a voluntary contribution programme designed to allow workers in the informal sector or with no formal income to save for their retirement with the EPF, whereas Kasih Suri Keluarga Malaysia KWSP is an incentive catering specially for housewives registered under the e-Kasih Programme to save with the EPF for their future wellbeing.

Evidence of the strong rebound in domestic economic activity can also be seen from the growth of EPF’s employer data where new employer registrations were recorded at 74,781 from January until September 2022, bringing the total number of employers registered with the EPF to 582,990.

Economic disruption such as the pandemic and economic crises have highlighted financial vulnerabilities across multiple segments of the population. The financial impact has been even more apparent in the uncovered group, which is those who are not covered under any social security scheme.

Therefore, the EPF has been actively pursuing effective EPF coverage to promote old age income security beyond the formal sector, covering the informal sector workers and those who are outside labour force. The EPF is mobilising efforts through integrated and strategic collaborations with multiple institutions and organisation such as gig platform providers as well as supervisory and regulatory bodies.

It is one of the EPF’s core pillars to provide a safe and trusted savings plan for all working adults in Malaysia in order to help them to build up retirement income, leading towards a dignified life in their golden years.
 

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

Issued by the EPF Media Desk 
Corporate Affairs Department
5 December 2022