EPF looks to expand global portfolio to maintain high dividend payout
KUALA LUMPUR: Malaysia’s largest pension fund is investing more overseas as it seeks to beat the four to five per cent return it has been achieving.
“We will definitely aim for that,” said Employees Provident Fund (EPF) chief executive officer Alizakri Alias in a Bloomberg TV interview with Haslinda Amin.
“But I think you know as well as I do, times are extremely challenging.”
The EPF, with about US$216 billion in assets, had been expanding its global portfolio to maintain high dividends for Malaysian workers in the face of limited opportunities onshore, he said.
“The rate of growth for our fund is outgrowing the rate of the economic growth of Malaysia,” said Alizakri yesterday.
“So whether we like it or not, we have to start looking overseas.”
The state fund currently has almost 30 per cent of its investments placed overseas. Its assets rose 10.9 per cent to RM924.75 billion last year.
Malaysia is teetering on the brink of a recession while the government faces risks of a credit ranking downgrade after S&P Global Ratings and Fitch Ratings lowered their outlook to “negative”.
The World Bank cut its forecast for the economy to a 3.1 per cent contraction this year, from a 0.1 per cent decline, as the Covid-19 pandemic and the Movement Control Order curbed economic activity.
Prime Minister Tan Sri Muhyiddin Yassin has since unveiled RM295 billion of stimulus packages to save jobs and shore up growth. The measures included an automatic reduction of people’s contributions to the EPF to seven per cent from 11 per cent to help boost consumer spending.
Last year, EPF declared its lowest dividend since 2008 at 5.45 per cent, with its syariah-compliant fund returning five per cent. That compares to the six per cent slide in the benchmark FTSE Bursa Malaysia KLCI last year.
“We have been outperforming what a pension fund should normally be returning,” he said.
EPF’s gains had exceeded its internal target for a two to 2.5 per cent average return over three years, he added.
It would also invest as much as possible into syariah-compliant assets as well as environmentally and socially responsible assets, even if the supply remained limited, he said.
These assets would fit the fund’s profile as they were less volatile and focused more on fundamentals and long-term sustainability, he added.
“This is the best time to be in a pension fund, to tell you the truth,” said Alizakri. “Those sister funds of mine who are in the shorter term, wow, I wouldn’t want to be in your shoes because there are so much uncertainties moving forward.”