KWASA DAMANSARA, 17 November 2023: The Employees Provident Fund (EPF) recorded a total investment income of RM47.86 billion for the nine months ended 30 September 2023 (9M 2023), an increase of 33% than the RM36.04 billion recorded in the same period in 2022. The amount was after netting off listed equity write downs recorded for the period. Out of the RM47.86 billion total investment income, RM4.62 billion were generated from mark-to-market (MTM) gains of securities that have not been realised. The MTM gains were mainly due to the fluctuation of foreign exchange rates.

 

Total investment income for the third quarter (Q3 2023) ended 30 September 2023, was RM14.67 billion after netting off write downs. The amount was an increase of RM2.38 billion from RM12.29 billion recorded in the corresponding period in 2022.

 

EPF Chief Executive Officer Datuk Seri Amir Hamzah Azizan said, “During the third quarter, we witnessed global equities posting a negative return, shifting significantly from the strong gains experienced in the first half of the year. The Gaza-Israel war and the ongoing Russia-Ukraine conflict will undoubtedly contribute to an atmosphere of uncertainty and market volatility.

 

“We anticipate geopolitical risks will continue to amplify the already turbulent economic situation. Market sentiments also experienced various changes, influenced by multiple factors, such as the concerns about the health of China’s economy, rising energy prices, and increasing government bond yields, all against the backdrop of the potential for an extended period of high interest rates. Notably, August 2023 marked a significant event when Fitch Ratings downgraded the US’s AAA rating to AA+. This action was prompted by the growing debt burden, underscoring the challenges faced by the global economic landscape,” he said.

 

Furthermore, Datuk Seri Amir Hamzah added that the global fixed income markets experienced negative total returns in the third quarter 2023, due primarily to the sharp increase in sovereign yields.

 

“The increase in government bond yields was influenced by resilient economic data and the prevailing narrative of “higher for longer” policy rates due to inflation moderation being slower-than-expected. These developments have introduced a new dimension to the global economic landscape, one that requires the EPF to implement a vigilant and adaptive approach as we navigate the financial market,” he said.

 

Equity investments remained a significant contributor, accounting for 63% of the total investment income in Q3 2023, with RM9.17 billion generated after netting off write downs. The increase in income compared to the RM5.89 billion recorded in Q3 2022 can be attributed to the fund managers’ proactive approach to realise capital gains at the beginning of the quarter, which saw some equity indices recording their best year-to-date performance, particularly for developed markets.

 

Write downs for Q3 2023 were minimal at RM0.10 million, compared to the RM36 million recorded in the same quarter in 2022, attributed to active portfolio management by the fund managers. Cost write down is an internal policy adopted by the EPF on its listed equity investments as a prudent measure to ensure the portfolios remain healthy.

 

Fixed Income Instruments, which serve 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 32% or RM4.76 billion, to EPF’s total investment income for Q3 2023.

 

Real Estate and Infrastructure registered an income of RM0.29 billion, while income from Money Market Instruments generated RM0.45 billion, contributing 2% and 3% to the total investment income for Q3 2023 respectively.

 

The EPF’s investment assets continued to record strong growth backed by the higher income generated from its investments and healthy net contributions received as at September 2023 amounting to RM73.58 billion, compared to RM63.61 billion recorded in 2022. As at September 2023, the EPF’s investment assets stood at RM1,092.32 billion, of which 37.7% was invested in overseas investments. The increase in overseas exposure since December 2022 was primarily due to the favourable movements in the foreign exchange translations as well as the capital appreciation that pushed the valuations higher. In Q3 2023, the EPF’s overseas investments generated RM6.55 billion, or 45%, of the total investment income recorded.

 

A total of RM42.71 billion out of the RM47.86 billion investment income was generated for Simpanan Konvensional, and RM5.15 billion for Simpanan Shariah. 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.

 

Resilience in challenging times, navigating complex economic landscape

 

In response to the International Monetary Fund’s (IMF) 2024 outlook¹  that global economic growth in 2024 will be slightly lower than 2023, Datuk Seri Amir Hamzah said the EPF acknowledges the prevailing economic conditions that are anticipated to shape the fund’s business landscape.

 

Advanced economies will be hardest hit given the restrictive monetary policy stances for major central banks leading to tight credit conditions and softening global demand. Low Composite Purchasing Managers’ Index in the United Kingdom and the Eurozone indicate weak private sector activity in the near term for Europe. Although the US economic growth is expected to slow down in 2024, the resilience it has shown in 2023 thus far has raised confidence in a soft-landing scenario.

 

On the domestic front, the widening of interest rate differentials, the ongoing wars and geopolitical risks have strengthened USD against other currencies, including MYR, considerably. This is despite the rise in crude oil prices and expectations of better economic development in China.  Notwithstanding the challenging global economic conditions, the Malaysian economy is projected to grow at a solid pace between 4.0% and 5.0% in 2024, supported by a resilient labour market, sustained investment activity, and a rebound in exports of goods.

 

Datuk Seri Amir Hamzah said the launch of Malaysia’s New Industrial Master Plan (NIMP) 2030 by the Government heralds a significant milestone in the country’s economic trajectory as it provides a strategic direction to develop the nation’s industrial sector to become globally competitive with high economic complexity.

 

“It is crucial for us to monitor closely these developments and their potential impact on our portfolio. While we had a good third quarter, it is not indicative of the performance in the fourth quarter, which remains a concern given the escalating geopolitical risks that threaten the global financial system amid heightened risks of higher inflation and slower growth,” said Datuk Seri Amir Hamzah.

 

“As we navigate this economic landscape, our focus remains on prudent risk management and strict adherence to our long-term Strategic Asset Allocation (SAA) model, which has consistently proven its efficacy and has been instrumental in fortifying our resilience amid market uncertainties.”

 

Surge in Voluntary Contributions marks heightened awareness for future income security

 

The EPF continues to record growth of new member registrations at 365,519, adding to the total number of EPF members as at 30 September 2023 of 15.99 million. Among them, a total of 8.53 million are active members², representing 50.4% of Malaysia’s 16.93 million³ labour force. The EPF’s active to inactive member ratio remained at 53%:47% as at September 2023.

 

Malaysia’s economy continues to show resilience as employment numbers continue to grow, albeit at a slower pace compared to last year. The EPF’s new employer registrations were recorded at 63,902 in Q3 2023, bringing the total number of employers registered with the EPF to 603,326. The decrease in employer registration is due to a return to normalcy following the notable surge observed in 2022 on the back of the resumption of businesses post-pandemic in 2020-2021.

 

In order to achieve its coverage target of more than 60% active members of the labour force by 2030, the EPF intensified its outreach programmes and proactive stakeholder engagement. This effort is supported by digital technologies that enable members to access a wider range of EPF’s products and services, including the registration and activation of i-Akaun, i-Saraan, and Simpanan Shariah.

 

The number of Simpanan Shariah registrations saw an increase from 231,637 as at September 2022, to 232,964 in 2023 with a CAGR of 15.8% since inception (2017). To-date, a total of 1,741,309 EPF members have opted into the Simpanan Shariah account, constituting 10.9% of the total EPF members.

 

The EPF’s ongoing efforts to encourage members to contribute voluntarily has helped the EPF to record a 26% growth in the number of voluntary contributors to 730,066 from 579,394 in the same period 2022. The EPF’s voluntary contribution programme i-Saraan showed positive response from members as an increase of 41% seen in total number of i-Saraan registered members from 838,672 as at September 2022 to 1.18 million as at September 2023.

 

As at September 2023, a total of 54,025 formal sector members had enrolled in the Voluntary Excess programme, which allows members to contribute more than the existing statutory rate of 11%. The EPF also encourages employers to contribute more than the statutory rate from the employer’s portion.

 

To help members plan for their retirement, the EPF conducts financial literacy programmes and personalised retirement and financial advice through its Retirement Advisory Services (RAS), where from January to September 2023, a total of 72,131 members had face-to-face advisory interactions with EPF’s certified and professional RAS officers.

 

Recognising the growing trend of informality in the Malaysian workforce and the challenges it poses for the lack of old age social protection coverage, the EPF remains determined to expand its coverage to this segment, who are often uncovered under any retirement scheme and face higher risks and vulnerabilities. The mobilisation of 41 vehicles and 10 mobile trucks, as part of its Mobile Team, highlights EPF’s continuous effort to reach out to the informal sector and self-employed workers across the nation. This is in addition to actively integrating and collaborating with government agencies, civil society organisations, stakeholders as well as supervisory and regulatory bodies.

 

This, Datuk Seri Amir Hamzah said, “has more to do with expanding the country’s social protection coverage as the EPF has the fiduciary duty to help bridge the gap that exists within our social protection framework and strive to make a tangible difference to the lives of Malaysians”.

 

He added that the EPF is pleased that the Budget 2024 seeks to bridge the savings and coverage gap that exists in the pension and retirement system in Malaysia. The Government’s continuing support to increase its matching incentive for i-Saraan programme, expand the i-Sayang programme to husbands, and revive the i-Suri programme, reflect an important step forward in prioritising the financial security and prosperity of Malaysians.

 

EPF Q3 2023 RESULTS

Portfolio	Asset % of total investment asset	Investment Income (RM billion)	As % of income
Equities	42%	9.17	63%
Fixed Income Instruments*	47%	4.76	32%
Money Market Instruments	4%	0.45	3%
Real Estate and Infrastructure	7%	0.29	2%
Total	100%	14.67	100%

 

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

 

EPF Q3 2023 MEMBERS / EMPLOYERS REGISTRATION

Issued by the EPF Media Desk 
Corporate Affairs Department
16 November 2023

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^{1. IMF World Economic Presser; 10 October 2023↩}

^{2. Active members refer to members who contributed at least once in the last 12 months↩}

^{3. Monthly Statistics of Labour Force as at August 2023, Department of Statistics Malaysia, report released on 10 October 2023↩}