‘WE CAN’T PUT ALL EGGS IN 1 BASKET’
Diversified, overseas investments yield better returns, says EPF
MALAYSIA should diversify investments not only in the country but also overseas to reap better yields, said the Employees Provident Fund (EPF).
EPF deputy chief executive officer of investment Datuk Mohamad Nasir Ab Latif said it was important for the pension fund manager to not “put all eggs in one basket”.
EPF’s total assets investments are worth US$180 billion (RM754.11 billion), with the fund ranked seventh in the world.
Nasir said EPF’s current overseas investments in 40 countries amounted to US$52.2 billion, representing 29 per cent of its total investment assets.
“Investments overseas are a must for EPF. We garner between 11 and 12 per cent annually for our total asset growth, which is equivalent to between RM50 billion and RM60 billion,” he said yesterday.
Nasir said Malaysians should not be worried about EPF’s investments abroad, as it was better for the fund to have diversified investments.
“For example, the Canada Pension Plan has more than 90 per cent of its total investments overseas. From our experience during the Asian financial crisis in 1997, we had all our investments in Malaysia. The value of most of our assets and investments plunged vigorously. Thus, we do not want it to ever happen again,” he explained.
Nasir pointed out that the country’s gross domestic product (GDP) growth was about five per cent, thus it was vital for EPF’s funds to snowball vigorously with better investment opportunities overseas.
“It is not safe for us to invest all our money in one place. If anything happens, it would affect everything. There would be no chance for growth if we continue to rely on investments in the local market. For example, in the local bourse, not many companies have issued initial public offerings,” he said.
He stressed that overseas investments would allow EPF to have wider opportunities, with the potential of having investments for bigger assets.
“Overseas investments are yielding better returns and have less risk profile,” he said, adding that for the past three years, EPF’s assets in foreign countries and the returns had been growing at a healthy pace.
He said it would be difficult for EPF to invest all of its money in Malaysia as the local market had limited investment opportunities.
“The bulk of our money, or 71 per cent, is still for local investments. The remaining 29 per cent is for foreign investments.”
Nasir said EPF’s total foreign investments in 2014, 2015 and 2016 had been growing at 23, 25 and 29 per cent respectively.
However, EPF’s overall income contribution recorded 32 per cent in 2014, 48 per cent (2015) and 39 per cent (2016) respectively.
“Although overseas investments are less, the returns are substantial.
“We want to make sure that we can provide better returns to our contributors,” he said, noting that overseas investments and diversifications were the right measures to take.
Out of EPF’s total investments overseas, 17 per cent is derived from its investments in the United States, comprising various asset classes, including equity, real estate, infrastructure and fixed income.
Nasir said EPF’s investment objective was for better returns, dividends and capital gains, spurred by its massive assets to secure substantial investments.