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EPF plans to increase overseas investments to improve returns
By Hamisah Hamid Published: 2010/04/22
Employees Provident Fund already has the nod to invest in global bonds and can invest more than US$10 billion in stocks and bonds outside Malaysia.
STATE-OWNED pension fund Employees Provident Fund (EPF) will increase its overseas investments to improve returns and sustain its dividend rate.
Chairman Tan Sri Samsudin Osman said the fund already has the nod to invest in global bonds. In fact, it can invest more than US$10 billion (RM31.9 billion) in stocks and bonds outside Malaysia.
"This is indeed a very sizable amount, making up approximately 10 per cent of our total fund of RM380 billion as at end of February 2010," he said at EPF's Portfolio Managers Annual Award Dinner 2010 in Kuala Lumpur.
The EPF manages the retirement savings of 12.4 million members. It declared a 5.65 per cent dividend for 2009, up from 4.5 per cent in 2008.
It has invested about US$6 billion (RM19.14 billion) in stocks abroad so far.
Samsudin also disclosed that this year, the EPF would outsource US$690 million (RM2.2 billion) to nine managers for the global Islamic equity mandates and US$600 million (RM1.91 billion) to four managers for the global sukuk mandates.
"The EPF will also be outsourcing about US$800 million (RM2.55 billion) for the global fixed income mandate scheduled by the end of the third quarter this year.
"With more than US$2 billion (RM6.38 billion) to be outsourced this year, we hope the industry will reciprocate by building capacity and capabilities coupled with good returns," he said.
The EPF recently hired a foreign-owned domestic manager to manage its domestic fixed income mandate, so as to add competition to the existing local managers.
Meanwhile, five categories of awards have been presented to top performing external portfolio managers, with three in the equity category and two in the fixed income category.
HwangDBS Investment Management Bhd was named 2009 Best Overall Equity Portfolio Manager, an award based on a three-year rolling financial performance and quality of service measures.
Nomura Asset Management Malaysia Sdn Bhd and CIMB-Principal Asset Management Bhd were picked as the first and second runner-up, respectively.
The Best Three-year Realised Return Equity Manager award was also secured by HwangDBS Investment Management, while the Best Risk-Return Equity Portfolio Manager award - based on the overall total fund three-year performance as measured by the information ratio - was bagged by Nomura Asset Management Malaysia.
In the fixed income category, AmInvestment Management Sdn Bhd went away with the Best Overall Fixed Income Portfolio Manager and the Best 3-Year Realised Return Fixed Income Manager.
Thursday April 22, 2010 EPF looks abroad to optimise returns
BY EDY SARIF
KUALA LUMPUR: The Employees Provident Fund (EPF) plans to increase its overseas investments to diversify its investment portfolio to optimise returns and improve its risk-return profile, says chairman Tan Sri Samsudin Osman.
“With the increasing size of EPF funds vis-a-vis the constraints in the domestic market and our risk appetite, it will not be easy to sustain the current level of dividend rate going forward. Hence, diversification abroad is the possible answer to meet our needs even though it is not without its challenges,” he said yesterday at the External Portfolio Managers Awards Ceremony for 2009.
Samsudin said the EPF had to date invested about US$6bil (RM19.35bil) in overseas equities. With the inclusion of the sum invested in global fixed income after receiving the go-ahead from the Finance Ministry last year, the total funds approved so far for both overseas equities and global fixed income amounted to more than US$10bil (RM32.25bil), he said.
“This year will also witness the completion of the EPF’s approved investment under the Malaysian International Islamic Financial Centre programme of US$2bil (RM6.45bil) for overseas equity and global sukuk mandates,” he said.
He said these new mandates were in line with EPF’s diversification strategy and were expected to contribute to the development of the industry and players that had demonstrated commitment, resources and capabilities to manage different types of investment mandates.
He added that EPF would be outsourcing US$690mil (RM2.23bil) to nine managers for the global Islamic equity mandates and US$600mil (RM1.94bil) to four managers for the global sukuk mandates in 2010.
Samsudin also reminded external portfolio managers that they had been entrusted to manage the retirement funds of EPF members and they must therefore do so with efficiency and integrity.
“While the EPF realises there are cost-income issues in growing business and capabilities, we will not allow for performance to ever be compromised,” he said.
At the ceremony, awards in five categories were presented to top performing external portfolio managers.
HwangDBS Investment Management Bhd was named 2009’s “Best Overall Equity Portfolio Manager”, an award based on a three-year rolling financial performance and quality of service measures.
Nomura Asset Management Malaysia Sdn Bhd and CIMB-Principal Asset Management Bhd were the first and second runner-up winners respectively.
HwangDBS also picked up the “Best Three-year Realised Return Equity Manager” award while the “Best Risk-Return Equity Portfolio Manager” award, which is based on the overall total fund three-year performance as measured by the Information Ratio, was bagged by Nomura Asset.
In the “Fixed Income” category, AmInvestment Management Sdn Bhd was named “Best Overall Fixed Income Portfolio Manager” and the “Best Three-Year Realised Return Fixed Income Manager”.
THE number of withdrawal applications made by Employees Provident Fund (EPF) members to invest in approved unit trust funds under the EPF-Members Investment Scheme (EPF-MIS) is expected to exceed one million per year by 2015.
Federation of Investment Managers Malaysia (FiMM) president Tunku Ya'acob Tunku Abdullah said the number of applications is anticipated to be over 500,000 compared with 300,000 in 2007.
As at March this year, net asset value (NAV) under the EPF-MIS is more than RM15 billion, which is about 7.4 per cent of the total unit trust industry's NAV of RM204 billion.
"Each year, EPF members represent 30 per cent of the volume of business, while the remaining 70 per cent are cash-pay customers.
"We expect the ratio to stay the same but with the implementation of the E-PPA (Elektronik - Pilihan Pelaburan Ahli), EPF members don't have to wait for two weeks to find out whether their applications have been approved or not as the system can process it in two days only," he told a news conference after the launch of the E-PPA in Kuala Lumpur yesterday.
The EPF-MIS was launched 15 years ago to allow EPF members to invest part of their savings in the approved unit trust funds.
Tunku Ya'acob said the electronic processing system has been implemented in stages since January this year. So far, 16 unit trust companies are already onboard the E-PPA system, while another 25 will hop on later.
On the outlook for the unit trust industry, he said it will grow further this year due to the increasing NAV and stock prices, which resulted in higher value of the funds.
"There will also be more people participating in unit trusts this year," he said.
FiMM executive director Lee Siew Hoong said that more unit trust funds are expected to be launched this year, from 42 funds launched last year.
The first quarter of the yearsaw 22 funds launched, similar to the previous corresponding quarter
EPF to hold RM500b by 2013
Written by Melody Song
Wednesday, 19 May 2010 23:22
KUALA LUMPUR: The Employees Provident Fund (EPF), which presently has RM371 billion under management, has projected that the amount would touch RM500 billion by 2013.
Speaking at a media briefing on EPF's investments, deputy CEO of the investment division Shahril Ridza Ridzuan said the retirement savings fund had been growing at a compounded annual growth rate (CAGR) of about 8% since 1980 when it had about RM9 billion under management.
"This is due to the fact that dividends are not paid out, but reinvested into the investors' accounts. Secondly, Malaysia continues to see a net inflow from workers due to its growing population," he said.
Of this RM371 billion figure, Shahril said about RM22.26 billion or 6% were invested in non-ringgit denominated assets, namely public equities in foreign markets.
He had outlined EPF's objectives and its long-term and conservative strategy in enhancing the value of capital from members' contribution in addition to ensuring stable returns.
Shahril said EPF was working together with the Federation of Investment Managers Malaysia (FIMM) to agree on a set of criteria before a unit trust fund is approved for members to invest in.
Deputy CEO of the finance and customer care division Hizwani Hassan said the EPF would announce new rules for the withdrawal of funds for unit trust investment in the second half of the year.
"We are considering putting in place a rating system on unit trust funds so investors will be fully informed on what they are planning on investing in," he told The Edge Financial Daily.
Currently, over 300 unit trust funds are approved under the EPF withdrawal scheme with 37 fund managers overseeing the assets.
At the event, Shahril also launched the EPF's Corporate Governance Principles and Voting Guidelines to promote corporate governance, transparency and integrity.
"The recent global financial turmoil has resulted in many corporate failures. As part of our strategic response, the EPF has worked to develop and put in place more effective corporate governance standards," he said.
The booklet will serve as a guideline to the EPF and its investee companies with regard to the EPF's stance on issues, including the authority to allot shares under Section 132D of the Companies Act 1965, share buy-back schemes, remuneration disclosures, employee share option schemes (ESOS) and related-party transactions. Other issues covered include the separation of power between the chairman and CEO, re-election of directors, board committee and dividend policy.
"The guidelines are above existing codes on corporate governance; we felt it was the right time to properly document this," said Shahril. "As the largest institutional investor in Malaysia, we felt it was good to let companies and investors know how we feel about certain issues."
General manager of the corporate finance department of the investment division Rohaya Mohammad Yusof said if a majority of shareholders voted in favour of certain resolutions that went against the EPF's stance, the motion would still be carried regardless.
Thursday May 20, 2010 EPF investments poised to hit RM500bil
By EDY SARIF
KUALA LUMPUR: The Employees Provident Fund (EPF) expects its investments to reach RM500bil by end-2013, said deputy chief executive officer (investment) Shahril Ridza Ridzuan.
He said the fund's investments stood at RM385bil in the first quarter of this year compared with just RM9bil in 1980. The EPF has over RM370bil in funds.
“We are chalking up about 8% compounded annual average growth now and by this, we expect our investments will be RM500bil by the end of 2013,” he said yesterday at a media briefing and media launch of EPF corporate governance principles and voting guidelines.
“There are two things that support the 8% annual growth. One is that when we pay dividends, we don't pay in cash but credit the amount into investors' accounts and reinvest,” he said.
The other, he said, was that the country continued to grow in terms of population and this brought in a net inflow of workers.
Shahril Ridza Ridzuan … 'We are chalking up about 8% compounded annual average growth now.'
“The total gross net income contribution exceeded the net outflow as a result of people retiring,” Shahril said.
He also said the EPF was guided by the Risk Appetite Statements, where it would not tolerate a greater than 10% chance of dividends falling below 2.5% in any year over the next 10 years.
“We too will not tolerate a greater than one third chance of the annualised dividends falling below inflation +2% over any rolling three-year period,” he said.
On the booklet launched yesterday, Shahril said it was part of the group's efforts to promote and educate companies on corporate governance. “Investors and regulators can expect to see better corporate governance from investee companies with the introduction of this booklet,” he said.
Shahril said the EPF believed that good corporate governance was not only about commitment to values and ethical business conduct but also about how an organisation was being managed. The booklet, which will serve as a guide to EPF and investee companies, was aimed at being more stringent on corporate governance issues that emphasise accountability, integrity and transparency of the boards of directors and disclosures made by listed companies.
Among the booklet's focus areas were size and composition of the boards, separation of power between the chairman and the chief executive officer, re-election of directors, board committee, authority of allot and share issues pursuant to Section 132D of the Companies Act 1965, employees share option schemes, related-party transactions and dividend policies.
EPF expands list of critical illnesses for health withdrawal
Written by Financial Daily
Tuesday, 15 June 2010 11:22
KUALA LUMPUR: The Employees Provident Fund (EPF) has expanded its list of critical illnesses eligible under its “Health Withdrawals” from 13 to 36 effective today. In a statement yesterday, EPF CEO Tan Sri Azlan Zainol said the new expanded list took into account the significant costs required in treating the critical illnesses.
EPF contributors are allowed to withdraw savings from their Account 2 to pay for their own and family members’ medical costs incurred for the treatment of critical illnesses.
The 26 critical illnesses comprise major organ transplant, multiple sclerosis, stroke, cancer, Alzheimer’s Disease, Parkinson’s Disease, chronic liver disease, chronic lung disease, Systemic Lupus Erythematosus (SLE) with lupus nephritis, paralysis, aplastic anaemia, Appalic Syndrome, benign brain tumour, blindness, cardiomyopathy, coma, coronary artery disease, deafness, encephalitis, fulminant viral hepatitis, heart attack, heart valve replacement, kidney failure, loss of independent existence, loss of speech, major burns, major head trauma, medullary cystic disease, meningitis, motor neurone disease, muscular dystrophy, poliomyelitis, primary pulmonary, surgery to aorta, terminal illness and total permanent disability.
In addition, EPF said members may now make withdrawals to treat family members under the age of 16 for another three critical illnesses — severe asthma, leukemia and intellectual impairment due to accident or sickness.
Family members include spouse, children, step-children or legally adopted children, parents, parents-in-law, step-parents or legally foster parents, and siblings.
This article appeared in The Edge Financial Daily, June 15, 2010.
EPF records RM5.55b investment income for 1Q2010 Written by Bernama
Monday, 21 June 2010 18:02
KUALA LUMPUR: The Employees Provident Fund (EPF) recorded an investment income of RM5.55 billion for the first quarter of this year amid firmer market conditions.
This was a 70.3% increase over the RM3.26 billion a year ago, following the recovering global economy, its chief executive officer, Tan Sri Azlan Zainol said in a statement on Monday, June 21.
"Significant improvement in the year-on-year investment performance was a reflection of a more buoyant and favourable economic environment as Malaysia steered into making a full recovery from the global economic and financial crisis," he said.
Azlan said while market conditions have improved compared to a year ago, the environment nevertheless remains volatile and we are cautious as the recovery of economies around the world is expected to take place at an uneven rate.
"This to a certain extent has had some impact on the overall performance of EPF's investment returns in Q1 this year," he said in a statement.
Azlan added that investment income for the quarter was led significantly by equities that contributed RM2.79 billion.
"Improved performance in equities was mainly driven by the rise of share prices coupled with higher trade volume spurred by encouraging domestic growth, which led to opportunities for EPF's equity managers to lock in profit," he said. - Bernama
Thursday June 24, 2010 EPF-FIMM move on investments draws mixed response
BY DALJIT DHESI
Fund managers say there are pros and cons in limiting investment to funds with at least a three-year record
PETALING JAYA: The move to allow Employees Provident Fund (EPF) members to buy only funds with a track record of at least three years has drawn mixed reactions.
Effective August, funds with a less than a three-year performance track record as well as newly launched ones will not be sold to EPF contributors.
The new rulings also reinstated a previous move to allow EPF members to invest in funds with foreign exposure, but now with a limit of up to 30%.
The Federation of Investment Managers Malaysia (FIMM) recently said the reason to allow EPF members to invest in performing funds — those that have higher consistent returns for at least three years, was to strengthen trust and confidence in unit trust investment.
Efficient Frontier Capital Advisors Sdn Bhd executive director Munawir Mohammad said while he appreciated the rationale behind the three-year track performance ruling, he felt members might also lose out as good investment “windows” did not last that long.
He pointed out that this was especially true for “thematic” investments. Thematic investing is an approach that seeks to identify and capitalise on economic, political, and social trends that are likely to have significant implications on important sectors of the economy and financial markets.
Munawir added that the 30% limit was still low and that the EPF should consider admitting funds with higher foreign exposure as investment opportunities appeared under many themes and more often outside Malaysia.
From a risk management point of view, he said members’ investments should be looked at “in total” as EPF has its own internal mechanisms to safeguard contributors’ savings for old age. But Areca Capital Sdn Bhd CEO Danny Wong has described the EPF-FIMM move as a good one as the three-year performance time frame would help investors choose funds that perform consistently and eliminate those that underperform.
But he warns that the selection criteria may lead members to focus too much on the past performance of a fund which may not necessarily be indicative of future performance.
There are other factors to consider in choosing the right investments, such as risks profiling, time horizon, qualitative factor and others, according to Wong. He said he supported the 30% foreign exposure limit, adding that it reflected the cautious stance of EPF in not wanting its investors to be over exposed.
HwangDBS Investment Management Bhd chief investment officer David Ng feels the EPF’s and FIMM’s efforts in setting minimum qualification standards for funds provides a more thorough screen or control in terms of the type of products that can be offered to EPF contributors.
For the industry, Ng said it meant fund managers would have to improve their performance and maintain an acceptable and consistent standards, which were critical for funds meant for retirement. “I see this as the first level of screening where offerings are limited to a qualified few. The next step is to ensure investors are well-informed of what they are investing in and the incidences of mis-selling are minimised,’’ he said.
The Federation of Malaysian Consumers Association (Fomca) secretary-general Muhammad Sha’ani Abdullah said unit trust companies offering products to EPF members should offer guaranteed minimum returns higher than the current EPF dividends, and that members opting for returns from financial markets must be protected through the imposition of standard obligations on fund managers.
Consumer Association of Penang (CAP) president S.M. Mohamed Idris said the association was against EPF members investing in unit trusts as many did not understand the risks involved.
He said many “had been burnt” by investing their EPF savings in unit trusts and that they would have done better by leaving their retirement savings alone.
EPF substantial shareholder in YNH
Written by Joseph Chin
Tuesday, 13 July 2010 08:24
KUALA LUMPUR: The Employees Provident Fund has emerged as a substantial shareholder in property-based YNH PROPERTY BHD [] with a 5.5% stake.
A filing with Bursa Malaysia on Monday, July 12 showed the EPF owns 22.01 million YNH shares after the accumulation of several purchases of shares from open market and accumulation of shares managed by its portfolio manager.
