THE Employees Provident Fund’s investment income surges 36.6 per cent to RM11.51 billion in the second quarter. Equity gains continue to be the main profit driver, says chief executive officer Datuk Shahril Ridza Ridzuan.
THE Employees Provident Fund’s (EPF) investment income grew 36.6 per cent to RM11.51 billion in the second quarter ended June 30 this year, thanks to the strong Bursa Malaysia.
“Market conditions have improved from a year ago and all asset classes in our portfolio have recorded healthy year-on-year growth, with equities continuing as the main profit driver for the quarter under review,” said chief executive officer Datuk Shahril Ridza Ridzuan in a statement yesterday.
The pension fund posted a RM8.44 billion investment income in the same quarter last year.
However, Shahril was cautious about the fund’s performance for the rest of the year.
“While we recorded significant improvements in year-on-year performances for both the preceding and current quarters, there is a slowdown in momentum that saw corporate profits normalising in Q2 this year. We, therefore, expect a moderation in income growth for upcoming quarters.”
Shahril said with the ringgit showing signs of improved stability, global investments would remain one of EPF’s significant revenue drivers in the future.
EPF recorded a lower net impairment of RM1.34 billion during the quarter, which was an improvement of RM2.28 billion, or 62.98 per cent, from RM3.63 billion previously.
From the RM11.51 billion investment income, fixed-income instruments contributed 37.29 per cent, equities (53.72 per cent), real estate and infrastructure (6.23 per cent) and money market instruments (2.64 per cent).
Equities, which made up 41.96 per cent of EPF’s total investment assets as at June, contributed RM6.18 billion of income, 61.45 per cent higher than RM3.83 billion recorded in the corresponding quarter of last year.
EPF also benefited from diversification into other asset classes, including fixed-income instruments and real estate and infrastructure investments through its subsidiaries.
A total of RM820.71 million of the total investment income was generated from Simpanan Shariah and RM10.69 billion from Simpanan Konvensional.
“In equities, the banking sector has been outperforming since the beginning of the year while the bulk of our impairments recorded for the quarter came from the telecommunications and oil and gas sectors. If this were to continue, we expect Simpanan Konvensional to benefit and outperform in the short term,” said Shahril.
The value of EPF investment assets rose 3.92 per cent, or RM28.67 billion, to RM759.78 billion in the second quarter from RM731.11 billion as at December 31 last year.
Of that, RM362.5 billion, or 47.71 per cent, were in syariahcompliant investments and the balance in non-syariah assets.
As at June 30, EPF’s overseas investments, which accounted for 29 per cent of its total investment asset, contributed 32.50 per cent to the total investment income during the period under review.
“Our foreign investments have proved to be a significant revenue driver in recent years, despite making up less than 30 per cent of total investment portfolio as at Q2 this year. The increase in global asset values mitigated the negative effect from the strengthening of the ringgit, therefore opportunities for us to realise profit,” said Shahril.
He said while the domestic market remained integral to EPF’s investments, it needed to diversify its portfolio into broader markets with better investment opportunities and greater liquidity to enable EPF to execute strategies in line with its mandate.
Equities, which made up 41.96 per cent of Employees Provident Fund’s total investment assets as at June, contributed RM6.18 billion of income, 61.45 per cent higher than RM3.83 billion recorded in the corresponding quarter of last year.