Malaysia’s EPF to increase co-investments

The Employees Provident Fund of Malaysia wants to increase its exposure to private equity via the strategy in order to boost returns.

Malaysia’s Employees Provident Fund, the sixth-largest pension fund in Asia by assets, is becoming deeply entrenched in private equity by doing more co-investments.

“We are actively pursuing co-investments opportunistically to maximise returns and also to build up the private equity team’s technical capabilities,” Dato’ Mohamad Nasir Ab Latif, deputy chief executive for investment at EPF told Private Equity International.

“The co-investments that we have made and plan to invest in will have to meet the risk-return profile of the EPF as a retirement savings fund. We are also actively pursuing direct deals in Malaysia as the fund is seen as a strategic investor in local transactions.”

EPF’s interest has picked up over the years as more fund managers offer co-investment opportunities. Its largest co-investment deal to date was the delisting of QSR Brands – the operator of KFC and Pizza Hut in Malaysia – as well as in private healthcare company Columbia Asia. Nasir added it has also co-invested with its GPs in South-East Asia, South Korea, US and Europe, but declined to specifically indicate its target allocation to co-investments.

The pension wants to accelerate its global investments as the Malaysian ringgit shows signs of improved stability, Datuk Shahril Ridza Ridzuan, EPF’s chief executive officer said in a statement in September. This is unsurprising as its overseas investments, which accounted for 29 percent of its portfolio as of June, contributed 33 percent to the total investment income and delivered a three-year annualised return on investment of 11 percent, enhancing the overall return of EPF’s investment portfolio.

EPF’s exposure to private equity, which includes investments in funds of funds, direct primary funds, and direct and co-investments, remains at 2 percent. The fund wants to increase its exposure to up to 5 percent over the next few years for portfolio diversification, as previously reported by PEI.

The pension, which ranked 15th among the world’s largest pension funds by Willis Towers Watson, had MYR 759. 8 billion ($180 billion; €152 billion) of total investment assets as of the second quarter. It has backed managers including Navis Capital Partners, Northstar Group and Actis, according to PEI data.