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IPE special report May 2018

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First-quarter returns surge at Malaysia’s Employees Provident Fund

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  • Kuala Lumpur, Malaysia
  • Kuala Lumpur, Malaysia

Malaysia’s Employees Provident Fund (EPF) has reported a record 58% year-on-year surge in return in the first quarter of the year, driven by equity investments.

For the quarter ended 31 March, investment income reached MYR8.8bn (€2bn), compared with MYR5.6bn in the corresponding quarter in 2013.

About 52% of the fund is invested in fixed income instruments, 43% in equities and the rest in money market instruments, real estate and infrastructure.

Overseas exposure constitutes 21% of total investment assets.

Returns from the fund’s global investments make up about 27% of all income generated.

As at March 31, investment assets stood at about MYR600bn, an 11.3% increase from the year-earlier period.

During the quarter under review, the fund’s equity portfolio was the biggest contributor, generating an investment income of MYR4.8bn, compared with MYR1.9bn in Q1 2013.

Chief executive Datuk Shahril Ridza Ridzuan said: “High trading volume and liquidity in the equity markets, particularly global developed markets, provided us with timely opportunities to realise gains from earlier equity investments.

“In addition, we benefited from a steady stream of dividends received from the listed companies we invested in.”

Income from real estate and infrastructure increased by 37%, while returns from loans and bonds climbed 4%.

The EPF said the marginal increase in income was primarily due to maturing investments reinvested at lower rates given the low interest rate regime.

Income from Malaysian government securities and equivalents increased by 4%, while money market instruments contributed almost MYR80m in the quarter under review.

Commenting on the outlook for the rest of the year, Shahril said: “Although we are optimistic the Malaysian economy will record better growth this year on expectations of export recovery supported by resilient domestic demand, we remain vigilant, particularly over the uncertainties surrounding the movements of capital as long-term interest rates adjust following recovery in key markets.”

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