Malaysia’ EPF to allocate $24.6b for shariah-compliant investments in 2017

Employees Provident Fund

Malaysian pension fund Employees Provident Fund (EPF) is allocating an initial fund size of MYR100 billion ($24.64 billion), or 14.67 per cent, from its total investment asset of MYR681.71 billion ($167.99 billion) as at March 2016, for shariah investments.

At MYR100 billion, the shariah-compliant fund will be largest such in the world. EPF is the seventh largest pension fund in the world.

EPF announced on Monday that its new retirement savings option ‘Simpanan Shariah’, a shariah-compliant option, will be launched beginning  2017.

Members of the fund will have the option of converting their current conventional pension savings to one that is managed and invested following shariah principles. Once converted, there is no option to revert.

Chief executive officer Shahril Ridza Ridzuan said, the fund’s venture into Islamic investments was not new as more than 45 per cent, or MYR295 billion ($72.69 billion), of EPF’s total investment assets were already shariah-compliant.

“We expect to grow our investment in shariah assets by at least MYR25 billion to MYR35 billion per year on average, or in tandem with the total asset growth in order to maintain a minimum of 45 to 50 per cent split between conventional and shariah assets,” he said.

With an initial MYR100 billion, he added that the fund size will be “more than ample”.

“It is big enough to provide diversification, but small enough to not have concentration risk under any asset class,” he commented.

EPF will set the same target returns for the shariah funds as its conventional fund, as both funds are constructed to have similar asset class breakdowns.

“The reason why the shariah fund is MY100 billion out of the MYR681.71 billion is to make sure we have the same risk return profile, and the same broad strategic asset allocation across both portfolios,” Ridzuan said.

In accordance with shariah principles, EPF will distribute a dividend rate based on portfolio performance of the shariah fund, and will not have any guaranteed minimum dividend.

He noted that members can look to EPF’s track record managing funds in the past 50 years.

“The EPF has consistently outperformed its target; in the past years we have achieved consumer price index plus 3.5 to 4 per cent, driven by a combination of both conventional and shariah assets. From our point of view, the shariah assets have been performing just as well as the conventional assets,” he told reporters.

The conventional savings has a minimum dividend guarantee of 2.5 per cent, which Ridzuan noted the fund has never fallen below.

Although investing in non-shariah compliant assets, investments in the conventional portfolio will adhere to environmental, social and governance (ESG) principles.

Also read:

Malaysia’s EPF records lower 1Q16 income, 36.2% dip from a year ago

Malaysia’s EPF has war chest for domestic deals

Malaysia’s EPF outsources $25.2b to external fund managers in 2015

Malaysia’s EPF declares 6.4% dividend, total payout of $9b

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.