KUALA LUMPUR, 31 May 2019: The Employees Provident Fund (EPF) today reported total investment income of RM9.66 billion for the first quarter ended 31 March 2019 (Q1 2019), lower than the RM12.88 billion recorded in the corresponding quarter last year.
EPF Deputy Chief Executive Officer (Investment) Dato’ Mohamad Nasir Ab Latif said given the current global and domestic economic and market environment, the results were indeed commendable.
In Q1 2019, Equities, which made up 39% of the EPF’s total investment assets, continued to be the main revenue driver, contributing RM4.16 billion, equivalent to 43% of total investment income, for the quarter.
Dato’ Mohamad Nasir stated that the volatility of the equities asset class and its impact on earnings was cushioned by EPF’s other more stable asset groups, such as fixed income.
“Despite its volatile nature, this asset class has higher long term expected returns. Equities will continue to play a pivotal role in enhancing returns and ensuring that we are able to declare dividends of at least 2% above inflation.”
A total of 50% of EPF’s investment assets are in fixed income instruments, which continue to provide consistent and stable income. The first quarter saw fixed income investments returning RM4.85 billion, equivalent to 50% of the quarterly investment income. Income from Malaysian Government Securities (MGS) & Equivalent in Q1 2019 was recorded at RM2.52 billion, while Loans and Bonds generated an investment income of RM2.33 billion.
During the quarter under review, Real Estate & Infrastructure recorded RM171.60 million in investment income. Investments in Money Market Instruments, which represent 6% of total investment assets, contributed RM469.86 million. Investment in this asset class, which includes fixed and time deposits, is vital in meeting the EPF’s short-term liquidity needs.
A total of RM0.90 billion out of the RM9.66 billion gross investment income was generated for Simpanan Shariah, and RM8.76 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.
Commenting on the outlook for the year, Dato’ Mohamad Nasir said, “We expect the global market to remain volatile in view of sentiments that are largely dominated by the ongoing US-China trade war, which seems to be reheating. Rising geo-political risks and uncertainty over the policy direction of major central banks will likely add further sustained pressure on the global economy in the coming months.
“As with other businesses, the EPF’s investments will be affected by these global risks, but we have our Strategic Asset Allocation to guide us. We will focus on meeting the 10% allocation for Real Estate and Infrastructure as part of our diversification plan, and we will deploy more cash into alternative assets to maximise returns.”
He added that the Bank Negara’s move to reduce the overnight policy rate (OPR) is expected to have a positive impact on the economy and help offset any economic downside.
“We are optimistic of delivering a real dividend of at least 2% over a rolling three year basis. Market downturns do have an advantage as during these times, we will take the opportunity to purchase fundamentally strong stocks at attractive prices.”
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.