by ALIFAH ZAINUDDIN / pic by MUHD AMIN NAHARUL

THE Employees Provident Fund (EPF) will be forced to liquidate its assets and rebalance its portfolio to make billions of ringgit in funds available to depositors in need of cash to buffer the economic impacts of the Covid-19 pandemic.

The EPF is estimating that both its i-Lestari and i-Sinar emergency schemes will see roughly RM45 billion pulled out by the end of next year, as eligible members are granted early access to their retirement savings.

Additional reductions in the contribution rate over the past eight months have seen the EPF lose another RM8 billion in opportunity cost for 2020 and a further RM9 billion estimated for 2021, bringing the total cash flow implication on the pension fund to RM60 billion.

EPF CEO Tunku Alizakri Raja Muhammad Alias (picture) did not provide details about the liquidation plan but said the fund would look at assets that “best suits” its long-term strategy.

Chief investment officer Rohaya Mohammad Yusof said the asset sell-off plan had been put in motion since March to ensure that the EPF had sufficient funds early on.

“For now, it is just a matter of enhancing the strategy, meaning (we will look at) whether there is a need to rebalance our assets. As far as we are concerned, the strategic asset allocation (SAA) will continue to be the prime drivers. We are also very cognisant about any impacts to the market,” Rohaya said on Monday in a media briefing in Kuala Lumpur. The EPF is the single largest investor in the local equity market.

According to filings with Bursa Malaysia today, the pension fund acquired 27.98 million shares in YTL Power International Bhd and another 21.89 million shares in YTL Corporation Bhd on Nov 12. It also disposed 441,700 shares in Sime Darby Plantation Bhd on Nov 11.

The EPF has also been actively trading in Axis Real Estate Investment Trust, Globetronics Technology Bhd, Hong Leong Bank Bhd, Inari Emertron Bhd, Sime Darby Plantation Bhd, Time Dotcom Bhd and Top Glove Corp Bhd, since Budget 2021 was announced.

The biggest trading volume was seen in Top Glove, with a total 37.32 million shares traded. The EPF bought 30.95 million shares in the glove counter and sold 6.37 million shares over the 12-day period. Top Glove’s share price had fallen by 17.6% over the period from RM8.50 to today’s closing price of RM7 on positive Covid-19 vaccine developments.

Tunku Alizakri declined to elaborate further on the EPF’s dividends for 2020, merely reiterating the fund’s mandate to deliver at least a 2.5% nominal dividend and beat inflation by about 2% on a rolling three-year basis.

In 2019, the EPF declared total dividends of RM45.82 billion of which RM41.68 billion (5.45% dividend) was for conventional savings and RM4.14 billion (5%) for shariah savings. This was lower than the RM47.3 billion declared for 2018 and the RM48.13 billion announced for 2017.

It has been suggested that the EPF would need at least RM46 billion in investment income to keep dividends above 5% for 2020 when it announces the annual payout in February or March next year.

“I think people forget that there is no such thing as a free lunch. For every amount of money that we give access to our members, it also means less money for us to invest.

“These are unprecedented times of high-quality assets with very low valuations. When more money is taken out and becomes unavailable, the trade-off is we will lose an opportunity,” Tunku Alizakri said.