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Monday March 23, 2009 EPF's Azlan explains timing of overseas investments
By YAP LENG KUEN
THINGS were going on well for the first three quarters of last year, Then in October, the markets saw the crash of the 120-year-old Lehman Brothers and the snowballing of the US subprime problem.
Other funds have been badly affected too. Calpers, the US’ largest pension fund, has dropped by 28% in value; Khazanah 20% and Temasek 31%.
The Singapore central provident fund has two accounts – ordinary that is paying a dividend of 2.5% while retirement and medisave is paying 4%.
An analysis of the EPF dividend over the last five years, split into equity and fixed income, revealed that without making any provisions, the dividend could be much higher.
Could the timing of the overseas investments be held back in view of red hot prices already at a high in many equity and commodity markets? Was there any advice against this at that time?
“There was no advice internally or externally not to enter these foreign markets at a high,’’ said EPF CEO Datuk Azlan Zainol. In fact, one or two organisations that the EPF met had expressed their support as they also agreed that Malaysia was a small market.
“Every time we go into the market in Malaysia, we end up owning stocks like Maybank where we would be holding a stake of less than 20%. We shouldn’t have such high stakes as 15%-16% in Malaysian companies,’’ he said.
The fund has strategic stakes only in the RHB group, Malaysia Building Society Bhd and Malaysian Resources Corp Bhd.
“For the rest of the companies, we should only be looking at 5%-9% stakes. Because we have no choice, we have to buy into these so-called good counters,’’ he said.
On top of that, each time the EPF goes into the market, it accounts for almost 20% of the volume. “That is not good. By right, a fund should not take more than 5% of the volume especially when the market is so dull,’’ he said.
The fund started going abroad in 2007 and 2008. “If people say the timing was not so good, the answer is ‘yes’ and ‘no’. Suppose the subprime market and Lehman had not collapsed, it would have been good. Did anybody say at the beginning of last year that this was going to happen?’’
No doubt, economists had been voicing their concerns over subprime and high levels of debt. “But nobody could foresee that it would be so terrible.
“Can anyone imagine that a 100-year-old bank can just go down like that, or Citigroup would shrink in value in just 12 months to US$1 from US$100?’’ he asked.
In retrospect, it is very easy to say what should not have been done. But the fund has been selling too. In January alone, it sold RM5bil in domestic equity.
“We were selling and luckily, we sold a 25% stake of RHB Capital to Abu Dhabi Commercial Bank at RM7.20. Today, RHB is only RM2-RM3. But I don’t think that was very clever as I thought I could get RM10. That is luck,’’ he said.
However, the EPF’s performance in equity investments had dropped by less than 20% in both domestic (18.4%) and overseas markets (19.5%). In comparison, the KLCI had dived by 39.3% and the Dow Jones 33.8%.
The Tokyo, Hong Kong and Singapore markets were down by more than 40% last year compared with 2007.
MORE members of the Employees Provident Fund (EPF) are opting for flexible withdrawals as they reach 55 years of age to better manage their retirement savings.
In a statement yesterday, the EPF said the Flexible Age 55 Withdrawal saw a significant increase in its take-up rate during the first quarter of 2009.
"In the first quarter, a total of 9,731 applications were approved under the Flexible Age 55 Withdrawal compared with 7,538 applications in the fourth quarter of 2008.
"On a year-on-year basis, it increased by 85.46 per cent compared with 5,247 applications in the corresponding period last year," it said.
Total amount withdrawn under this withdrawal amounted to RM505.94 million (RM442.71 million) in the fourth quarter of 2008 compared with RM341.85 million in the first quarter of 2008, it said.
EPF chief executive officer Datuk Azlan Zainol said the growing popularity of the Flexible Age 55 Withdrawal signified increased awareness among members that lump sum withdrawal would likely lead to inadequate income during retirement.
"The Flexible Age 55 Withdrawal was introduced in November 2007 under the 'Beyond Savings' initiative. It offers members the option to receive their EPF funds in instalments and on an ad hoc basis," he said.
Zainol said nevertheless, the Lump Sum Age 55 Withdrawal plan is still the more popular option for members reaching age 55.
In the first quarter of 2009, 35,640 applications for Lump Sum Age 55 Withdrawal (fourth quarter 2008: 26,658) were approved, with total withdrawals of RM1.62 billion (fourth quarter 08: RM1.15 billion). - Bernama
Tuesday July 14, 2009 EPF equities value surges
By IZWAN IDRIS
PETALING JAYA: The value of equities held by the Employees Provident Fund (EPF) rose faster than the market over the past six months as the fund increased its stakes in battered stocks and rode on the rally that lifted share prices from their lows in March.
The latest publicly available data showed that the market value of EPF’s top 15 holdings had risen 23% since the start of the year, compared with the 21% gain in the FBM KLCI as of last week.
As a pension fund, the EPF follows a strict conservative strategy in managing its funds that had swelled to RM356bil as of the end of March.
About a quarter of this money is invested in equities, but only a fraction is allowed for overseas investment.
“Contrary to popular belief, the EPF is quite aggressive in managing its stock portfolio,’’ said a senior fund manager with a local asset firm.
EPF’s most valuable shareholding is its 930 million shares, or 15.5% stake in Sime Darby Bhd, which is also the most expensive stock in terms of market value on Bursa Malaysia.
Its current stake in Sime Darby is less than the 15.7% reported as at end of last year.
Despite the slight decrease, the value of EPF’s stake in Sime Darby had increased to RM6.67bil as at the end of June compared with RM4.97bil at the start of the year after the stock climbed 38% over the same period.
Filings with Bursa Malaysia in the past months showed that the EPF’s stake in Sime Darby fluctuated by as many as three million shares a day.
Conservative estimates of the fund’s transactions put it at about 20% of the stock’s daily volumes.
The fund is also active in buying and selling shares in other big companies where it owns substantial stakes in Tenaga Nasional Bhd, Malayan Banking Bhd and IOI Corp Bhd.
Bloomberg data showed that the EPF has stakes exceeding 10% in 47 companies as at last week.
However, there were little change in terms of the fund’s equity stakes in the country’s biggest firms over the past six months, except for Axiata Group Bhd, formerly known as TM International Bhd.
EPF’s current top 15 shareholdings have a market value of about RM55bil against RM43.7bil six months ago.
Analysts said a rising market provided the opportunity for funds like the EPF to make trading profit on stocks.
This may help boost returns from investments at a time when companies are expected to pay lower dividends as their profits shrink.
EPF had warned that this year’s dividend payout to contributors may be less than the 4.5% paid for 2008.
It has to guarantee a minimum payout of at least 2.5% every year as its fund size grows at about 7% and 10% rate annually.
Currently, the EPF is invested in more than 100 companies on Bursa Malaysia, with its 67% in Malaysian Building Society Bhd and 57% in RHB Capital Bhd comprising its biggest stakes.
The total market capitalisation of just over 950 companies on Bursa Malaysia stood at RM817bil as at end-June.
While the fund’s stakes in the country’s biggest firms remain relatively stable, it has been increasing its shares in a number of mid-size companies.
Among stocks that saw a significant jump in EPF investment so far this year was WCT Bhd.
The pension fund started the year with a 20% stake in the construction group but took advantage of a steep price plunge in January to buy more shares, raising its equity stake to 26% by end-June.
Latest filings showed that the EPF owned 25.16% of the company as at July 6.
Shares in WCT closed at RM2.23 yesterday, up 47% year-to-date.
The stock, however, was down 61% from a peak of RM4.98 achieved on Jan 11 last year.
EPF’s stake in WCT is currently worth about RM430mil compared with RM220mil at the start of the year.
The fund did not disclose the amount paid for the additional stakes in its filings with Bursa.
Other mid-sized firms that saw increased EPF interest are oil and gas counters like Dialog Group Bhd and KNM Group Bhd.
The two stocks had posted strong double digit gains this year from their recent lows in March.
THE Employees Provident Fund (EPF) is bracing itself for a reduction in revenue this year, as members opt for more withdrawals to facilitate better cash flow in the short term, its chairman Tan Sri Samsuddin Osman said.
"We also face the very real possibility of reduced contributions in the face of a flagging economy where company closures are expected and layoffs imminent," he said in the EPF 2008 annual report released recently.
The EPF recorded its highest ever revenue of RM20 billion last year, up 9.36 per cent over the previous year's RM18.29 billion, thanks to higher returns from investments in loans and bonds, equities and Malaysian Government Securities (MGS).
The strong performance in 2008 enabled it to declare a dividend rate of 4.50 per cent for the year.
Friday September 4, 2009 EPF investment income up 17% on equities
By LEONG HUNG YEE
PETALING JAYA: The Employees Provident Fund (EPF) has recorded a 17.1% increase in investment income to an unaudited RM4.8bil for the second quarter ended June 30 from RM4.09bil a year earlier.
Compared with the preceding quarter, the investment income achieved represented a 46.64% improvement over the RM3.27bil charted in the first quarter of this year, EPF said in a statement yesterday.
The higher investment income was due to improved performance from investments in equities for the second quarter.
Equities, which was among the highest income contributors in the second quarter, contributed RM1.74bil, seven times higher than the RM239.55mil earned in the first quarter.
Of the funds invested in the equities market, 37.55% was in trade and services-related equities while 33.88% was in financial equities.
Chief executive officer Tan Sri Azlan Zainol said despite the instability of the global economy, EPF had managed to meet expectations and delivered better investment results in the quarter under review.
“This reflects the value of our disciplined approach in managing risks and returns for our members.
“Although higher returns are desirable, we must not lose sight of our priority to provide capital preservation and stability of returns,” he said, adding that the second quarter had seen signs of recovery in major global equity indices, especially in the countries that EPF invested in.
“While we cannot say that the worst is over, should this trend continue or at least maintains at the current levels, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year,” he said.
The highest income contributor in the second quarter was loans and bonds, which contributed RM1.81bil to EPF’s total investment income compared with RM1.78bil attained in the previous quarter.
The EPF maintained a low-risk profile by continuing with its policy of having the majority of its loans and bonds in high-grade companies with credit ratings of AAA or AA, it said.
As at June 30, a total of 33.66% of loans and bonds investments was in companies with AAA credit ratings and 49.4% in companies with AA ratings.
According to the EPF, its investments in Malaysian Government Securities (MGS), another major contributor to its total investment income, rose marginally by RM830,000 to RM1.11bil compared with the preceding quarter.
Meanwhile, contributions from money market instruments dropped 21.5% to RM94.27mil in the second quarter from RM120.11mil in the first quarter.
Properties contributed RM20.8mil to EPF’s income in the second quarter, a slight increase from the RM20.6mil in the first quarter.
The EPF’s total fund currently stands at RM353.9bil, up 1.61% from RM348.3bil in the first quarter.
Azlan said while there were signs of stabilisation in the global markets, it was too early to see how this would affect EPF for the remainder of the year.
“Nevertheless, as a long-term investor and custodian of more than RM350bil in retirement fund, we will continue to take proactive measures to enhance the value of our members’ savings in these trying times while still upholding our prudent approach,” he added.
EPF’s 2Q investment income up 47%
Written by Yong Yen Nie
Friday, 04 September 2009 11:59
KUALA LUMPUR: The Employees Provident Fund’s (EPF) investment income for the second quarter (2Q09) rose 46.6% to RM4.8 billion from RM3.27 billion in the previous quarter, mainly due to improved performance in its equities portfolio.
In a statement here yesterday, EPF said earnings from equity investment grew seven times to RM1.74 billion in 2Q09 from RM239.55 million in 1Q09. As at 2Q09, EPF had invested RM93.9 billion in equities, representing 26.53% of its total fund size.
EPF said improving global stock markets, as well as Bursa Malaysia, had contributed to the surge in income from equities in 2Q09.
Commenting on EPF’s higher investment income, its chief executive officer Tan Sri Azlan Zainol said: “The second quarter of 2009 showed signs of recovery in major global equity indices, especially in the countries that EPF invests in.
“While we cannot say that the worst is over, should this trend continue, or at least maintain at the current level, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year.”
EPF’s total fund size stood at RM353.93 billion, up 1.61% from RM348.31 billion in 1Q09.
During 2Q, loans and bonds were the highest earners, with RM1.81 billion compared with RM1.78 billion in the previous quarter. EPF’s largest investment was in loans and bonds, with 41.18% of its total fund size, or RM145.75 billion, invested in the two asset classes.
EPF said it had maintained a low-risk loans and bonds profile by investing mostly in high-grade companies with AAA or AA ratings.
Income from Malaysian government securities (MGS) rose marginally by RM830,000 to RM1.11 billion in 2Q09 from the previous quarter. EPF allocated RM97.46 billion for investing in MGS, which is about 27.54% of its total fund size.
Azlan said despite the instability of the global economy, the EPF had managed to meet expectations and deliver better investment results in 2Q09.
“This reflects the value of our disciplined approach in managing risks and returns for our members. Although higher returns are desirable, we must not lose sight of our priority to provide capital preservation and stability of returns,” he said.
Income from money market instruments fell 21.5% to RM94.3 million from RM120.11 million in 1Q09. Investment in PROPERTIES [] contributed RM20.81 million to its income in 2Q09 compared with RM20.63 million in the previous quarter.
The fund had invested RM15.2 billion or 4.29% of its total funds in money market instruments, as well as RM1.62 billion in properties.
Azlan said: “While there are signs of stabilisation in the global markets, it is too early to see how this will affect us for the remainder of the year.
“Bear in mind that things can take a different turn at any time and any decision making must be exercised with care for the best interest of EPF contributors.”
Nevertheless, as a long-term investor and custodian of a more than RM350 billion retirement fund, EPF would continue to take proactive measures to enhance the value of its members’ savings in these trying times while still upholding a prudent approach, he said.
This article appeared in The Edge Financial Daily, September 4, 2009.
Friday October 16, 2009 Higher EPF dividend likely By YAP LENG KUEN
CEO: It’s possible provided no market disruption in next 3 months
PETALING JAYA: A higher dividend may be expected from the Employees Provident Fund (EPF) this year as it recovers the bulk of its investments overseas after a 14% year-to-date improvement in the Dow Jones Industrial Average, which closed above 10,000 points on Wednesday.
“With the Dow Jones recovering to the 9,000-plus level since July, our equity investments in the overseas markets are now above our costs,’’ EPF CEO Tan Sri Azlan Zainol told StarBiz.
“As a result, a higher dividend for 2009 compared with the previous year can be expected, provided that the markets do not experience any erratic disruptions in the next three months.”
He said “in relation to our equity investments, we will continue to remain vigilant on the development of the global and local markets.’’
Last year, the EPF declared a dividend of 4.5% compared with 5.8% in 2007, mainly due to the increase in provisioning resulting from the sharp decline in global equity prices.
In a statement issued on March 16, the EPF had said that in accordance with accounting best practices, it had made allowances of RM4.69bil for diminution in value of overseas and local equities (of which RM3.2bil was allocated for overseas stocks) compared with RM520mil the year before.
“Our policy is to provide in full for every diminution in value in our investments overseas,’’ Azlan had told StarBiz then.
An analysis of the EPF dividend over the last five years, split into equity and fixed income, had revealed that without making any provisions, the dividend could be much higher.
The EPF had invested RM16bil on a staggered basis in five major markets – the United States, Britain, Australia, Singapore and Japan.
As at the end of 2008, the fund had invested RM87.9bil in equities, which was 25.7% higher than the previous year.
Since the beginning of this year, the FTSE 100 index has gone up by 18.3%; Nikkei 225 (15.6%); S&P/ASX 200 (30.6%) and Straits Times (54%) while the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) has improved 42.2%.
In sharp contrast, the figures at the end of last year showed that the fund’s overseas investments had deteriorated by 19.5% and by 18.4% domestically.
This was triggered by the 39% drop in the FBM KLCI; Dow Jones (-34%); FTSE 100 (-31%); Nikkei (-42%) and Singapore (-49%).
“It (this year’s dividend) will be definitely better than last year’s,’’ said UOB Kay Hian (M) Holdings Sdn Bhd head of research Vincent Khoo.
“But the biggest exposure is in fixed income where yields are low. So (the dividend) is probably less than 6%,’’ he said, adding that a good year to compare with would be 2007 when equity markets were very strong.
Choong Khuat Hock, head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd, said “gains from domestic investments are more important in determining how much dividend the EPF can pay.’’
“This is because the EPF invests a much larger proportion of its funds in domestic rather than international equities,’’ he noted.
Second-quarter results already showed a 46.64% increase in income to RM4.8bil.
Equities were among the highest income contributors in the second quarter, growing to RM1.74bil, representing seven times the income earned in the first quarter.
“The second quarter of 2009 has shown signs of recovery in major global equity indices especially in the countries that EPF invests in,’’ Azlan had said in his second quarter statement.
“While we cannot say that the worst is over, should this trend continue, or at least maintain at the current level, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year.’’
The Employees Provident Fund (EPF) may have been asked to pay RM520 million for a slice of Maxis Bhd, Malaysia's biggest mobile operator that is set to be among Southeast Asia's biggest initial public offering (IPO) this year.
Sources said the pension fund was offered about 100 million shares, or 1.3 per cent, of Maxis at RM5.20 a share.
Before the mobile operator was delisted two years ago, EPF had over 114 million shares of Maxis Communications Bhd. Maxis Communications is the parent of Maxis Bhd.
Fund managers said the book-building process is expected to be done in two methods for institutional investors.
Typically, big investors will bid for the amount of shares and the price at which they are willing to pay under the book-building. This will officially start tomorrow.
The other way is that selected institutional funds will be offered a block of shares, about 50-100 million shares, at RM5.20 each or lower.
"If the strike price is higher than RM5.20, the selected funds will be paying RM5.20. But if the strike price is below RM5.20, they will pay the lower price.
"The offer is usually given to loyal and long-term investors like EPF. Other funds will have to go through the conventional way," said a fund manager.
The strike price is the price at which the IPO is finally set, at the end of the book-building process.
Sources also revealed that five other institutional funds, two local and three foreign funds including a Middle East fund, were offered shares at a similar price.
Although the official book-building process is expected to start tomorrow, rumour has it that an investment bank has already opened its book to orders from yesterday, with the bid starting at RM4.80 a share.
CIMB Investment Bank Bhd is the principal adviser for the IPO while Credit Suisse and Goldman Sachs are joint global coordinators and book-runners.
Meanwhile, Bloomberg News reported that Malaysian funds, which included the EPF, will buy almost half of the shares on offer.
Maxis Communications has offered 2.25 billion existing shares, or 30 per cent, of Maxis Bhd under the IPO. Some 92 per cent of that have been reserved for institutional investors.
Maxis Bhd's final prospectus is expected to be out on October 28.
The Employees Provident Fund (EPF) has appointed Shahril Ridza Ridzuan as its new deputy chief executive officer in charge of investment, effective December 1.
Shahril, 39, will succeed Johari Muid, who is now in charge of the pension fund's strategic planning unit.
The outgoing chief of property group Malaysian Resources Corp Bhd has vast experience in corporate finance, restructuring, mergers and acquisitions, as well as property development, the EPF said in a statement.
Shahril also serves as a non-executive director on the boards of Media Prima Bhd, The New Straits Times Press (Malaysia) Bhd and Pengurusan Danaharta Nasional Bhd.
EPF retirement withdrawals total RM1.97b in 3Q
Written by The Edge Financial Daily
Thursday, 26 November 2009 00:02
KUALA LUMPUR: Retirees withdrew a total of RM1.97 billion from the Employees Provident Fund (EPF) in the third quarter of 2009 (3Q09), a 20% rise from RM1.64 billion in the previous corresponding quarter.
In a statement yesterday, EPF said a total of RM1.41 billion (2Q09: RM1.81 billion) was withdrawn as lump sum age 55 withdrawal, representing an increase of 14.22% from a year earlier. Total applications approved under this category rose to 32,446 (2Q09: 39,901) from 29,054 previously.
The remaining RM557.05 million (2Q09: RM705.89 million) was withdrawn under flexible age 55 withdrawal which rose by 38% from RM403.51 million in 3Q08.
"Increasing member interest in flexible age 55 withdrawals underscores members' confidence in the EPF in earning dividends for their savings," said EPF chief executive officer Tan Sri Azlan Zainol.
"Nonetheless, 72% of retirement withdrawals still consist of lump sum withdrawals. We hope to see this amount decrease over time as more members become increasingly aware that lump sum withdrawal will likely lead to income inadequacy during retirement."
Azlan said the trend of stretching the retirement ringgit was also reflected in the applications for members' investment withdrawal that continued upwards, albeit marginally, by 3.58% compared with 3Q08.
In 3Q09, a total of 111,418 applications (2Q09: 114,268) were approved with withdrawals amounting to RM872.89 million (2Q09: RM906.8 million) compared with 107,564 approved applications and RM808.53 million withdrawn a year earlier.
EPF said members, however, exercised greater prudence and care in making withdrawals for housing as shown in a significant annual decrease in 3Q09, due to the adverse economic conditions.
It said with many purchasers adopting a "wait and see" attitude, approved applications for housing withdrawals in 3Q09 fell 20.18% to 86,664 from 108,573 in 3Q08 (2Q09: 104,951 applications). The amount withdrawn fell 30.75% to RM1.1 billion from RM1.58 billion a year earlier (2Q09: RM1.32 billion).
As at end-September 2009, EPF membership grew 2.4% to 12.28 million compared with 12.211 million in 2Q09 and 11.99 million in 3Q08. The total number of active members rose to 5.73 million from 5.6 million in 3Q08 (2Q09: 5.72 million). The number of registered employers rose 2.44% from 440,603 in 3Q08 to 451,399 in 3Q09 (2Q09: 447,119).
