EPF reports RM15.16b investment income in Q1 2023 amidst challenges, driven by global equities and domestic investments

The Employees Provident Fund (EPF) of Malaysia reported investment income of RM15.16 billion for the first quarter ended March 31, 2023. This represents a 3% increase from the RM14.77 billion recorded in the corresponding quarter in 2022. The figure takes into account netting off listed equity write downs for the quarter.

Despite facing challenges such as persistent supply-chain disruptions and the collapse of Silicon Valley Bank and Signature Bank in the United States, EPF said it managed to maintain consistent performance for the quarter. 

In a statement today, EPF said this was attributed to healthy returns from global equities, driven by expectations of a shallow recession in developed markets and optimism over China’s reopening.

During the first quarter of 2023, income from equities increased to RM8.96 billion, after accounting for write downs, compared to RM8.75 billion in Q12022.

Equities remained the top contributor to income, accounting for 59% of the total investment income.

Fixed income instruments, which serve as capital preservation, contributed 32% or RM4.79 billion to the investment income for Q12023. This asset class includes Malaysian Government Securities and Equivalent (MGS), as well as Loans and Bonds. 

The retirement fund said it capitalised on trading gains as MGS and Government Investment Issues (GII) rallied during the quarter, benefiting from declining benchmark yields and easing inflationary expectations in the US.

Real Estate and Infrastructure generated an income of RM0.92 billion, while income from Money Market instruments increased to RM0.49 billion in Q1 2023, aligning with return expectations for these asset classes.

As of March 2023, EPF’s overall investment assets reached RM1.04 trillion, with overseas investments accounting for 37% of the total assets.

Overseas investments, primarily in equities, outperformed and contributed RM7.04 billion in income, representing 46% of the total investment income.

Domestic investments accounted for 63% of EPF’s total assets, primarily invested in Held-To-Maturity Fixed Income instruments. 

EPF said it continues to allocate more than 70% of its new investment annual allocation to the domestic market, aiming to support and contribute to the growth of the domestic economy.

Out of the RM15.16 billion investment income, RM13.33 billion was generated for Simpanan Konvensional (conventional savings), and RM1.83 billion for Simpanan Shariah (Shariah-compliant savings).

Looking ahead, EPF acknowledges the projected slowdown in growth for advanced economies compared to emerging and developing markets.

However, it remains optimistic and focused on performing sectors that can contribute to its prospects of providing a consistent dividend to its members. Industries and sectors expected to recover after the pandemic will be the EPF’s primary focus, anticipating increased labour demand. –TMR