Foreign equities continued to enhance total portfolio return
KUALA LUMPUR, 29 November 2017: The Employees Provident Fund (EPF) today reported an increase in quarterly investment income to RM12.95 billion for the third quarter ended 30 September 2017 (Q3 2017), a year-on-year increase of 5.13 per cent from RM12.32 billion recorded during the same period last year.
Commenting on EPF’s Q3 2017 Investment performance, Deputy Chief Executive Officer (Investment) Dato’ Mohamad Nasir Ab Latif said, “The EPF’s overall portfolio performance has benefited from the rally in the overseas equities markets in Q3 2017. We did not see similar returns from the domestic equities market as the FBM KLCI performance was flat compared to other markets, which recorded between two (2) and five (5) per cent growth.”
The EPF recorded net ipairment of RM791.55 million in the quarter under review in accordance with the Malaysian Financial Reporting Standards (MFRS 139), higher compared with RM349.59 million in Q3 2016. This is due to the higher provision recorded for domestic equities in the telecommunications and oil and gas sectors.
In Q3 2017, Equities, which made up 41.86 per cent of EPF’s total investment assets, contributed RM7.91 billion of income or 61.09 per cent of the total investment income. The income recorded was 12.75 per cent higher than RM7.02 billion recorded in the corresponding quarter in 2016.
As at September 2017, a total of 50.45 per cent of EPF’s investment assets were in fixed income instruments which recorded an income of RM4.49 billion, equivalent to 34.63 per cent of the total quarterly investment income. Out of the RM4.49 billion, Malaysian Government Securities (MGS) & Equivalent recorded RM2.17 billion in Q3 2017, an increase of 10.96 per cent or RM213.98 million, from RM1.95 billion in Q3 2016, in line with the growth of the portfolio. Loans and Bonds, however, generated lower investment income of RM2.32 billion, compared with RM2.56 billion in Q3 2016.
Investments in Money Market Instruments and Real Estate & Infrastructure each represented 3.53 per cent and 4.16 per cent of total investment assets, and contributed an investment income of RM274.27 million and RM263.83 million respectively in Q3 2017.
“Our current investment in Money Market Instruments is above the targeted three (3) per cent under the Strategic Asset Allocation (SAA) due to ongoing regulatory restrictions in new overseas investments. Over the long run, the EPF must continue to expand our foreign assets portfolio as it is key to our diversification and allows us to meet our return targets,” commented Dato’ Mohamad Nasir.
As at 30 September 2017, the EPF’s overseas investments, which accounted for 30 per cent of its total investment asset, contributed 48 per cent to the total investment income during the quarter. Diversification into different asset classes in various countries and currencies had helped the EPF to record higher income for the quarter, despite significant difference in market performance globally.
Out of the total RM12.95 billion investment income for Q3 2017, a total of RM860.83 million was allocated for Simpanan Shariah, which derives its income solely from its portion in Shariah assets, while RM12.09 billion income was allocated for Simpanan Konvensional, which is generated by its share of both Shariah and non-Shariah assets.
The value of EPF investment assets reached RM771.20 billion, a 5.48 per cent or RM40.09 billion increase from RM731.11 billion, as at 31 December 2016. Out of the total investment assets, a total of RM370.10 billion, or 48 per cent, were in Shariah-compliant investments and the balance in non-Shariah assets.
“We still have one more quarter before the year-end and we are confident that our diversification into various asset classes will enable us to meet our real dividend target of at least two (2) per cent above inflation over a three-year rolling period, for both Simpanan Shariah and Simpanan Konvensional,” said Dato’ Mohamad Nasir.
The Employees Provident Fund (EPF) is Malaysia’s premier retirement savings fund to help its members achieve adequate savings for a comfortable retirement. This is in line with EPF’s vision to help members achieve a better future and the mission to safeguard members’ savings and deliver excellent services. The EPF has evolved significantly from transaction-centric to a professional fund management organisation with a strong focus on retirement security. The EPF is guided by a robust and professional governance framework when making investment decisions. It continues to play a catalytic role in the nation’s economic growth and seeks to cultivate a savings and investment culture among its members to improve the country’s financial literacy level.