‘Fund needs to look be­yond Malaysia to se­cure bet­ter re­turns’

New Straits Times - - Business / News - Ayisy Yu­sof

KUALA LUMPUR: The Em­ploy­ees Prov­i­dent Fund (EPF) should have a bal­anced re­turns and as­set al­lo­ca­tion to gen­er­ate good re­turns for its in­vestors, said an­a­lysts.

They said there was a case for EPF to con­sider boost­ing in­vest­ments in the United States.

MIDF Re­search deputy head Mohd Redza Ab­dul Rah­man said to se­cure bet­ter re­turns, EPF would need to look be­yond Malaysia.

“In­creas­ingly, pen­sion funds have been look­ing be­yond the tra­di­tional fixed-in­come and stock as­set classes,” Redza told NST Busi­ness yes­ter­day.

He added that many fund man­agers had ven­tured into pri­vate equity in­vest­ments, in­clud­ing in­fra­struc­ture and prop­erty de­vel­op­ment pro­jects.

“Gen­er­ally, fund man­agers have to look out­side to find bet­ter re­turns at the level of risk pro­file al­lowed by their man­date,” he said.

Redza was re­spond­ing to Prime Min­is­ter Datuk Seri Na­jib Razak’s an­nounce­ment dur­ing his re­cent visit to the US that the fund was look­ing at in­vest­ing fur­ther in the world’s big­gest econ­omy.

Na­jib said EPF had in­vested about US$7 bil­lion (RM29.35 bil­lion) in the US and planned to spend an­other US$3 bil­lion to US$4 bil­lion on in­fra­struc­ture de­vel­op­ment in the coun­try.

EPF, in its state­ment yes­ter­day, said the US was one of the key mar­kets within its in­vest­ment uni­verse.

The fund also said it would scru­ti­nise for­eign in­vest­ment op­por­tu­ni­ties that fit its risk-re­turn pro­file.

This, it added, was in line with its long-term over­seas di­ver­si­fi­ca­tion pro­gramme.

Redza said EPF would con­duct ex­ten­sive analy­ses on any po­ten­tial in­vest­ments be­fore mak­ing the de­ci­sion to in­vest.

“For ex­am­ple, in­vest­ments in of­fice build­ings that gen­er­ate good rental yields that are higher than the div­i­dend pay­out com­mit­ment would be some­thing worth con­sid­er­ing.”

Redza said in­fra­struc­ture pro­jects such as toll roads and power gen­er­a­tion as­sets would be an­other av­enue to di­ver­sify in­vest­ments into other as­set classes, es­pe­cially those with at­trac­tive cash flow pro­jec­tions and ac­cept­able risk pro­file.

Al­though some other as­set classes might be risky, but with a good as­set al­lo­ca­tion model, he be­lieved that EPF would be able to find a bal­ance be­tween the risk and re­turns.

Bank Is­lam Malaysia Bhd chief econ­o­mist Dr Mohd Afzanizam Ab­dul Rashid said the US econ­omy had been grow­ing at a healthy clip while equity prices had been record­ing mul­ti­ple highs dur­ing the year. “There is an in­vest­ment case for EPF to con­sider (in­vest­ing fur­ther in the US) from a macroe­co­nomic stand­point.

“We also un­der­stand that in­fra­struc­ture spend­ing is an im­por­tant growth agenda in the US, given that its in­fra­struc­ture is rather old and in dire need for rein­vest­ment,” he said.

Afzanizam said there was an op­por­tu­nity to in­vest in the in­fra­struc­ture space as an in­sti­tu­tional in­vestor.

He added that EPF also had to con­stantly di­ver­sify its port­fo­lio in or­der to re­duce the over­all port­fo­lio risks and that in­cluded di­ver­si­fi­ca­tion in terms of ge­o­graph­i­cal lo­ca­tion.

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