EPF allocated more funds for external fund managers in 2019

A total of RM132.4b had been channelled to the external fund managers in 2019, an increase of 12.6% compared to RM117.6b the previous year


THE Employees Provident Fund (EPF) continued to allocate more money to external fund managers last year to boost its portfolio performance.

Malaysia’s largest pension fund, which manages over RM900 billion in assets, had channelled RM132.4 billion to external asset managers in 2019 — a 12.6% increase of RM117.6 billion allotted in the preceding year.

The funds under external managers accounted for about 14% of the EPF’s total investment assets.

EPF chairman Tan Sri Ahmad Badri Mohd Zahir, in a statement yesterday, said the money had been invested in both equity and fixed income instruments as part of efforts to diversify the state-linked fund’s assets.

“Given the size of the EPF’s portfolio, around RM924.75 billion in overall investment assets by the end of 2019, we will continue to engage external fund managers to invest a portion of our funds to further optimise returns and as part of efforts to diversify and enhance the performance of our assets,” Ahmad Badri said.

Recently, the EPF posted a gross investment income of RM12.16 billion for its first quarter ended March 31, 2020 — its first decline in three quarters — in what it called an “exceptionally challenging period” due to the Covid-19 pandemic.

CEO Tunku Alizakri Raja Muhammad Alias said all asset classes were severely affected, particularly equities which suffered steep declines as global markets fell sharply, while the FTSE Bursa Malaysia KLCI dropped by 15% as at March 31, 2020.

The fund’s fixed income instruments contributed RM4.87 billion to gross income in the quarter. Real estate, infrastructure and money market instruments contributed RM430 million and RM540 million respectively. Equities investment earned RM6.32 billion or 52% of the total gross income.

Tunku Alizakri said the fund is well-positioned to not only ride out the current volatility, but to also take advantage of declines in valuations of fundamentally strong assets. The EPF has continued to lift its overseas investment, which currently accounts for 28.8% of the fund’s total investment assets.

To compare, its overseas investment exposure stood at 27.1% in 2018 and had contributed to 38% of the EPF’s RM50.87 billion gross investment incomes for the year.

Ahmad Badri said the Covid-19 pandemic has entirely reshaped the way the world operates, making it an uphill task for them to execute its investment strategies.

However, he said the fund would continue to strive to maintain consistent returns over the long term, as well as preserve and enhance the value of capital from members’ savings.

“We are confident that the external fund managers we have selected will help us achieve this,” Ahmad Badri said.

For the financial year 2019, the EPF delivered a dividend rate of 5.45% with a payout amounting to RM41.68 billion for Simpanan Konvensional, while Simpanan Shariah saw a dividend rate of 5% with a payout amounting to RM4.14 billion.