EPF’s investment income rises 7.6% to RM12.4b in 2Q18

According to its deputy CEO, this is despite the global market downturn which includes Malaysia


The Employees Provident Fund’s (EPF) investment income has recorded an increase of 7.64% year-on-year (YoY) to RM12.39 billion in the second quarter of 2018 (2Q18) from RM11.51 billion reported in the previous year’s corresponding period, despite the global market downturn.

EPF deputy CEO (investment) Datuk Mohamad Nasir Ab Latif said the escalating global trade tension, along with the interest-rate hike by the US Federal Reserve had also resulted into a less favourable trading environment in the domestic market.

“The trade tension between the US and China and the US’ interest-rate hike have contributed to the capital outflows from emerging markets (EMs), including Malaysia.

“While some of the developed markets — including the US and eurozone countries — recorded gains in their equity markets, the EMs recorded negative returns,” he said in a statement yesterday.

He added that Malaysia had suffered a market downturn as a result of the deteriorating performance at the regional markets.

“As Asean was one of the worst performers, Malaysia was not excluded from the market downturn.

“Nonetheless, the diversification into different markets and sectors has enabled the EPF to record consistent performance with equities emerging as the main contributor during the 2Q,” he said.

The EPF stated that between April and June this year, its equities segment contributed RM7.98 billion, or 64.4%, of its total investment income for the quarter. The segment represents 40.61% of the EPF’s total investment assets.

The fund’s fixed-income investment recorded RM4.09 billion in 2Q18, representing 33.07% of the EPF’s quarterly investment income.

The EPF added that 52.09% of its investment assets were in fixed income instruments and have been its consistent and stable income.

The income from Malaysian Government Securities and equivalent for 2Q18 rose to RM2.4 billion, while the loans and bonds segment gene- rated an investment income of RM1.7 billion.

The investments in money market instruments — which represent 2.53% of the EPF’s investment assets — contributed RM215.44 million to its investment income, while the real estate and infrastructure segment recorded RM91.73 million.

The EPF said the real estate and infrastructure segment is expected to provide the retirement fund with an inflation-hedged return, with more income expected to come in the second half of the year.

The retirement fund also stated that the value of EPF investment assets in 2Q18 has increased 0.38%, or RM3.05 billion, to RM813.18 billion from end-2017.

“However, it had declined from 1Q18 due to the drop in equity mar- kets,” it said.

The EPF’s asset position remained healthy compared to its members’ savings balance of RM780.07 billion.

“Out of the total investment assets, RM322.89 billion, or 39.71%, were in Shariah-compliant investment, while the balance were invested in the conventional portfolio,” it said.

The EPF said RM1.09 billion of the RM12.39 billion gross investment income was generated for Simpanan Shariah, while RM11.3 billion was for Simpanan Konvensional. “Simpanan Shariah derives its income solely from its portion of the Shariah portfolio, while income for Simpanan Konvensional is generated by its share of both Shariah and conventional portfolios,” it said.

As at end-June 2018, the EPF’s overseas investments — which accounted for 26.5% of its total investment assets — contributed 38.3% of the total investment income during the quarter under review.

Moving forward, Mohamad Nasir said the global market’s uncertainty is forecast to shroud the market expectation for the remaining of the year as the policy and political risks remained unsettled.

“On the domestic front, the outlook is likely to turn favourable with easing foreign outflows and clearer policy direction from the new government.

“The EPF remains focused in delivering above-inflation returns, with at least 2% above the inflation rate over a three-year rolling period, which will preserve and enhance the value of our members’ retirement savings,” he said.