Malaysia’s Employees Provident Fund (EPF) has set its sights on growing its real estate and infrastructure as well as private equity investment exposure to between 8 per cent and 10 per cent of the fund’s total assets under management (AUM) in the next five to seven years.
Currently, the pension fund’s real estate and infrastructure spread is at 3 per cent.
In a media briefing elaborating the fund’s performance for 2015 and dividend payout, chief executive officer Shahril Ridza Ridzuan said, real estate and infrastructure assets make a great asset class to hold in the long term, complementing EPF’s investment horizon.
“Over the long term, we believe that we can grow the non-market-listed to roughly about 8 to 10 per cent of our AUM. At the point of time, it is basically a growing fund so we are not static in terms of the amount of money we are putting in,” he told reporters.
Ridzuan added that the speed of growth for this asset class will naturally not be as fast as market-driven or market-priced assets is because of the level of due diligence required for each of the acquisitions.
“We are building this as per the capacity required internally,” he said.
Ridzuan commented that EPF had remained fairly prudent in its investment approach throughout the last year, with slightly more than half of its assets in fixed income.
“This protects the capital and maintain the minimum dividend. Whereas the equities and real estate portion protects us against inflation,” he said.
The pension fund recorded a gross investment income of MYR44.23 billion in 2015, breaching the MYR40 billion mark for the first time despite the challenging and volatile economic environment. In 2014, the fund recorded MYR39.08 billion.
Gross investment income was 13.2 per cent higher than what was achieved in 2014. On Saturday, the fund announced a dividend payout of 6.4 per cent, the highest to date, totalling $9.09 billion.
EPF’s view on 2016 is cautious, noting continued challenging economic climate.
The fund will also maintain the consistency of its strategic asset allocation, with fixed income assets making up the bulk of the fund’s investments, followed by equities.
“In terms of our strategic asset allocation, when we report to you this time next year, I wouldn’t expect our splits between fixed income, equities and the rest will shift that much. However, during the year, we may shift, between different asset classes, one to two percentage points,” he said, noting that the fund may do more trading, to offset the economic volatility.