Malaysia’s largest pension fund, Employees Provident Fund (EPF) has declared a dividend rate of 6.40 per cent for 2015, with a total payout amounting to MYR38.24 billion ($9.09 billion).
The payout amount required for every one per cent dividend rate for the year was MYR5.98 billion, 10.13 per cent higher compared with MYR5.43 billion in 2014.
The increase was in tandem with the growth in investment assets of the EPF, which stood at MYR684.53 billion ($162.66 billion) as at December 31, 2015, the fund said in a statement released on Saturday.
The EPF recorded MYR44.23 billion in gross income for the financial year ended December 31, 2015, an increase of 13.18 per cent compared with MYR39.08 billion in 2014.
Chairman Samsudin Osman said the gross investment income achieved was due to its 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,” he said.
The EPF’s diversification into global assets and currencies allowed it to realise significant gains with profits from non-Ringgit sources making up 48 per cent of the EPF’s total gross investment income throughout the year.
“As a retirement savings fund, our investments have always emphasised on sustainability of returns over a long term horizon as opposed to short term gains. We are pleased to declare a dividend rate of 6.40 per cent, a commendable performance given the prevailing challenges.
“More importantly, we were able to meet our two strategic investment targets of at least 2.5 per cent nominal dividend on a yearly basis as required by the EPF Act 1991 and at least two (2) per cent real dividend on a rolling three-year basis,” Osman said.
During the year under review, equities continued to be the main contributor of income with 58.81 per cent amounting to MYR26.01 billion, up 13.54 per cent compared with MYR22.91 billion in 2014.
The foreign equity portfolio played a significant role in 2015 by generating more than 50 per cent of the income from equity investment.
Fixed income instruments (comprising Malaysian Government Securities and equivalent, loans and bonds) continued to provide a stable stream of income, in total contributed 35.40 per cent of the MYR44.23 billion gross investment income for the year.
The real estate and infrastructure asset class contributed MYR1.70 billion in investment income in 2015 with annual growth of 22.23 per cent compared with 2014.
Within the asset class, the foreign investment, which was initiated in 2010, showed encouraging performance over the years.
“Our structured overseas investment programme, which formally started in 2006, contributed 48 per cent of the total MYR44.23 billion investment income this year despite being only 25 per cent of our total investment size, thus outperforming our domestic assets,” Osman said.
EPF is targeting to launch its shariah retirement saving scheme in 2017. Against that backdrop, the fund’s exposure to shariah-compliant investments covering multiple asset classes to date exceeds 40 per cent of total assets. The EPF also ensures that all investments, including the non-shariah assets, are ethical in nature, which filters out investments in sectors that promote gambling, alcohol/liquor and military weapons, among others.
Samsudin cautioned that the economic climate in 2016 would be more challenging.
“A combination of growth fears and depressed commodity prices have seen most major indices fall, including the FBMKLCI, since the start of the year. This is a very different climate than the first half of 2015 in which our investments in global markets were able to mitigate the impact from the domestic market downturn. The volatility in the currency markets also means that it will be difficult for the EPF to repeat the outperformance in global assets that we saw in 2015.