The fund is keen to see movement of wage rate upwards, but it must match with the availability and right way to do it
by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL
MALAYSIA needs a better living wage mechanism that has a balance between the demand of employers and employees without causing too much disruption.
The Employees Provident Fund (EPF) CEO Datuk Seri Amir Hamzah Azizan (picture) said in philosophy and direction, the fund is keen to see movement of wage rate upwards, but it must match with the availability and right way to do it.
“If you get the wage up, the contribution to EPF will be better which then resulted in a better saving rate. For now, we don’t have a plan to increase the contribution rate, when the economy is in a better condition, we might look back at this. We always encourage people to increase their contribution if they can afford it.
“The RM101 billion pandemic-related withdrawals since 2020 had resulted in 48% of EPF members having less than RM10,000 in their accounts,” he told a media briefing on EPF’s 2021 financial performance yesterday.
EPF announced a dividend rate of 6.1% for Simpanan Konvensional and 5.65% for Simpanan Shariah, with a total payout of RM50.45 billion and RM6.27 billion respectively, bringing the total payout for 2021 to RM56.72 billion.
Meanwhile, Amir Hamzah said EPF intends to increase the investment in various domestic asset classes in 2022 as now is the time for Malaysia’s market to push out with international borders set to reopen and vaccination rates among the best in the world.
However, it will depend on the movement of the market following the designated portfolio and return on investment (ROI) as the fundamentals for the members, he added.
“Regarding the Russia-Ukraine conflict, it is important to note that our exposure for global investment, we have no direct exposure to any interest in Russia or Ukraine. For immediate point of view, no material effect.
“It is important for us to have agility to move our portfolio to address. For EPF, we can make money when the market goes up or down depending on the volatility play that we want because we have a long-term investment horizon,” he said.
EPF also shared its plans to allocate RM1 billion to invest in companies that are at pre-IPO stage.
Amir Hamzah said this will bring more companies to Bursa Malaysia, while curbing the flight of Malaysian companies that may, otherwise, seek investors elsewhere by providing the capital they need.
“We have not seen enough stimulus going into Bursa Malaysia. We have seen investment traps (in the space between) where companies move on from venture capital market to pre-IPO. There is a gap in that market for investors.
“Towards the later stage of the pre-IPO, there is a stage that EPF can play, because we see that we can manage the risk element and we see fairly good returns there. We are working with specific funds to promote that, and looking at companies which are at that stage,” he added.
For 2021, EPF recorded its first ever negative net contribution (contributions after withdrawals) in 20 years of RM58.2 billion, but remained steadfast and prudent in its long-term investment strategies, while adapting to the challenges to ensure long term sustainable returns.
EPF recorded a gross investment income of RM67.06 billion, with RM6.91 billion allocated to Simpanan Shariah. The performance was attributed to EPF’s diversification approach as guided by its Strategic Asset Allocation, which has kept the fund resilient to financial shocks and remain stable in unprecedented situations.
By asset class, fixed income instruments made up 45% of investments, while equities comprised 44%. Real estate and infrastructure as well as money market instruments made up 6% and 5% of EPF assets, respectively.
The continued market recovery in 2021, particularly in the developed markets, contributed to EPF’s listed equity portfolios, providing opportunities for it to realise profits.
Equities, particularly foreign listed equities, which recorded an ROI of 10.44%, continued to be the driver of returns. Total income contributed by the equity asset class was RM38.93 billion or 58% of EPF’s total gross income.
The private equity portfolio also demonstrated strong performance, recording an ROI of 19.01%. To ensure long-term healthiness, EPF took prudent measures to write down RM1.15 billion of its listed equity portfolio in 2021, which was lower than the RM7.71 billion write down recorded in 2020, in line with the broad recovery in the equity markets.