Malaysia’s EPF to boost investments in alternatives

Malaysia’s largest retirement savings fund expects to double investments in alternatives amid a challenging year brought about by depressed commodity prices.

Malaysia’s Employees Provident Fund (EPF), or Kumpulan Wang Simpanan Pekerja, announced in a press briefing that it plans to boost its allocation to alternative assets. The fund will raise its allocation to up to 10 percent from 5 percent of the fund’s total assets in the next five to seven years.

EPF’s private equity investments are mostly done through other funds instead of direct investments in deals, said chief executive officer Datuk Shahril Ridza Ridzuan.

Among its fund investments, EPF has committed to Northstar Equity Partners III, Navis Asia Fund IV, and Actis Malaysia Fund, according to PEI Research & Analytics. In 2013, it announced it would increase its private equity allocation from 2 percent to possibly 5 percent over the next five years, as reported by Private Equity International.

In 2015, the EPF invested about 51 percent of its assets under management in fixed income, 44 percent in equities, about 3 percent in alternatives and 1 percent in cash, according to a report from the pension fund. It added that its annual dividend payout reached 6.4 percent, down from 6.75 percent the year before, totalling MYR 38.24 billion ($9 billion; €8.2 billion).

From 2008 to 2015, EPF’s total investments rose from MYR 350 billion to MYR 685 billion, the report said. Meanwhile, overseas investments accounted for 48 percent in 2015, totalling MYR 171 billion.

The $160 billion retirement fund recorded a gross investment income of MYR 44.23 billion as at 31 December 2015, 13.2 percent higher than what was achieved in 2014.

Chairman Tan Sri Samsudin Osman said: “The gross investment income achieved was due to our diversification strategy across multiple asset classes in various countries and markets. Although the correlation is high among global markets, the diversification strategy allowed us to take opportunities through profit realisation and seek potential investments at attractive valuations.”