Malaysia’s EPF bullish on North Asia

The Malaysian investor is increasing its private equity investments in China, South Korea and Japan, according to its chief executive.

Malaysia’s Employees Provident Fund will continue its push into North Asia, as the investor seeks to ride on the growth of China’s domestic spending, Shahril Ridza bin Ridzuan, its chief executive, said in Hong Kong on Wednesday.

“In the past two years it’s been about North Asia – China, South Korea and Japan – and tapping into the growth of China in particular, Ridzuan said. “We have increased exposure to China, and we are steadily increasing our assets in public equities as well as private equity.”

Logistics and distribution centers are favoured investment sectors, especially as domestic spending in the country accelerates, Ridzuan highlighted.

EPF’s logistics assets portfolio includes assets in South Korea, China and Australia, among others. The pension fund also inked a joint venture with the Australian firm Goodman Group in 2015 to tap into warehousing facilities in Australia.

The pension fund has a 5 percent exposure to private equity, which includes investments in funds of funds, direct primary funds, and direct and co-investments, Ridzuan told Private Equity International on the side-lines of Bloomberg Invest Asia. The investor is “comfortable with the 5 percent, relative to EPF’s $200 billion AUM, and is not looking to increase its allocation anytime soon”, he added.

EPF has previously backed funds managed by Navis Capital Partners, Northstar Group and Actis, according to PEI data.

Ridzuan noted that the investor has also been heavily invested in developed OECD markets, its “first port of call in terms of its global expansion”.

Currently about 28 percent of EPF’s assets are invested overseas, while the remaining 70 percent is invested in cash-driven and export-oriented industries in Malaysia, as at 31 December 2017.

Asked whether EPF is looking at the US, Ridzuan noted the pension fund’s exposure in US has fallen behind. “We’ve been shifting some of our allocation in the US from public equities to infrastructure and private equity side, mostly because valuations have become slightly stretched in 2017, so we’re looking to re-deploy assets.” He did not specify how much of EPF’s portfolio is invested in the US.

On the prospects for 2018, EPF’s chief executive predicted “increased uncertainty and nervousness among the investor crowd.

“I think it is really at the point in the market today where a lot of people are sitting on gains from last year and the year before and probably thinking now is not a bad time to cash in on some of those gains.”

EPF achieved an annualised return on investment of 7.2 percent in 2017.