KUALA LUMPUR, May 31 2019 : The Employees Provident Fund (EPF) reported total investment income of RM9.66 billion for the first quarter ended March 31, 2019 (1Q2019), lower than the RM12.88 billion recorded in the corresponding quarter of last year.
In a statement, deputy chief executive officer (Investment) Datuk Mohamad Nasir Ab Latif said given the current global and domestic economic and market environment, the results were indeed commendable.
Equities, which made up 39 per cent of the EPF’s total investment assets, continued to be the main revenue driver, contributing RM4.16 billion, equivalent to 43 per cent of total investment income, for the first quarter.
Mohamad Nasir stated the volatility of the equities asset class and its impact on earnings was cushioned by EPF’s other more stable asset groups, such as fixed income.
“Despite its volatile nature, this asset class has higher long-term expected returns. Equities will continue to play a pivotal role in enhancing returns and ensuring we are able to declare dividends of at least 2.0 per cent above inflation,” he said.
A total of 50 per cent of EPF’s investment assets are in fixed income instruments, which continue to provide consistent and stable income.
The first quarter saw fixed income investments returning RM4.85 billion, equivalent to 50 per cent of the quarterly investment income, while income from Malaysian Government Securities and Equivalent in 1Q2019 was recorded at RM2.52 billion.
Meanwhile, loans and bonds generated an investment income of RM2.33 billion.
During the quarter under review, real estate and infrastructure recorded RM171.60 million in investment income.
Investments in money market Instruments, which represent 6.0 per cent of total investment assets, contributed RM469.86 million.
Investment in this asset class, which includes fixed and time deposits, is vital in meeting the EPF’s short-term liquidity needs.
A total of RM0.90 billion out of the RM9.66 billion gross investment income was generated for Shariah Savings and RM8.76 billion for Conventional Savings.
On the outlook for the year, Mohamad Nasir said the global market was expected to remain volatile in view of sentiments that are largely dominated by the ongoing US-China trade war, which seems to be reheating.
“Meanwhile, rising geo-political risks and uncertainty over the policy direction of major central banks would likely add further sustained pressure on the global economy in the coming months.
“As with other businesses, the EPF’s investments will be affected by these global risks, but we have our Strategic Asset Allocation to guide us.
“We will focus on meeting the 10 per cent allocation for real estate and infrastructure as part of our diversification plan, and we will deploy more cash into alternative assets to maximise returns,” he added.
He said Bank Negara Malaysia’s move to reduce the overnight policy rate is expected to have a positive impact on the economy and help offset any economic downside.
“We are optimistic of delivering a real dividend of at least 2.0 per cent over a rolling three-year basis. Market downturns do have an advantage as during these times, we will take the opportunity to purchase fundamentally strong stocks at attractive prices,” added Mohamad Nasir. – Bernama