Malaysia’s $216b retirement fund on the hunt overseas for higher gains

Employees Provident Fund (EPF) chief executive officer Alizakri Alias.

Malaysia’s largest pension fund is investing more overseas as it seeks to beat the 4% to 5% return it has been achieving.

The Employees Provident Fund with about $216 billion in assets has been expanding its global portfolio to maintain high dividends for Malaysian workers in the face of limited opportunities onshore, Chief Executive Officer Alizakri Alias said in a Bloomberg TV interview with Haslinda Amin.

“The rate of growth for our fund is outgrowing the rate of the economic growth of Malaysia,” he said on Tuesday. “So whether we like it or not, we have to start looking overseas.”

The state fund currently has almost 30% of its investments placed overseas. Its assets rose 10.9% last year to 924.75 billion ringgit ($216 billion) as of the end of 2019.

Malaysia is teetering on the brink of a recession while the government faces risks of a credit ranking downgrade after S&P Global Ratings and Fitch Ratings lowered their outlook to negative. The World Bank cut its forecast for the economy to a 3.1% contraction this year, from a 0.1% decline, as the coronavirus pandemic and a nationwide lockdown curbed economic activity.

Lowest Dividend

Prime Minister Muhyiddin Yassin has since unveiled 295 billion ringgit ($69 billion) of stimulus packages to save jobs and shore up growth. The measures included an automatic reduction of people’s contributions to EPF to 7%, from 11%, to help boost consumer spending.

While times are “extremely challenging,” EPF expects to exceed 4% to 5% returns for the whole of 2020 as well as over the next five years, Alizakri said. The gains have already exceeded its internal target for 2% to 2.5% average return over three years.

Last year, the Kuala Lumpur-based fund declared its lowest dividend since 2008 at 5.45%, with its Shariah-compliant fund returning 5%. That compares to the 6% slide in the benchmark FTSE Bursa Malaysia KLCI Index in 2019.

“We have been outperforming what a pension fund should normally be returning,” he said.

EPF will also invest as much as possible into Shariah-compliant assets as well as environmentally and socially responsible assets, even if the supply remains limited, he said. These assets fit the fund’s profile as they are less volatile and focused more on fundamentals and long-term sustainability, he added.

“This is the best time to be in a pension fund, to tell you the truth,” Alizakri said. “Those sister funds of mine who are in the shorter term, wow, I wouldn’t want to be in your shoes because there are so much uncertainties moving forward.”

Bloomberg

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

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  • 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. 
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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.