KUALA LUMPUR (May 31): The Employees Provident Fund's (EPF) investment income for the first quarter ended March 31, 2019 (1Q19) dipped to RM9.66 billion from RM12.88 billion a year earlier.
In a statement today, EPF deputy chief executive officer (Investment) Datuk Mohamad Nasir Ab Latif said given the current global and domestic economic and market environment, the results were commendable.
EPF said that in 1Q19, equities, which made up 39% of the pension fund's total investment assets, continued to be the main revenue driver, contributing RM4.16 billion, equivalent to 43% of total investment income, for the quarter.
Mohamad Nasir said the volatility of the equities asset class and its impact on earnings was cushioned by EPF's other more stable asset groups, such as fixed income.
"Despite its volatile nature, this asset class has higher long-term expected returns. Equities will continue to play a pivotal role in enhancing returns and ensuring that we are able to declare dividends of at least 2% above inflation," he said.
Mohamad Nasir said a total of 50% of EPF's investment assets are in fixed income instruments, which continue to provide consistent and stable income.
"The first quarter saw fixed income investments returning RM4.85 billion, equivalent to 50% of the quarterly investment income. Income from Malaysian government securities (MGS) and equivalent in 1Q19 was recorded at RM2.52 billion, while loans and bonds generated an investment income of RM2.33 billion," he said.
Mohamad Nasir said during the quarter under review, real estate and infrastructure recorded RM171.6 million in investment income. Investments in money market instruments, which represent 6% of total investment assets, contributed RM469.86 million.
He said investment in this asset class, which includes fixed and time deposits, is vital in meeting the EPF's short-term liquidity needs.
Meanwhile, he said a total of RM900 million out of the RM9.66 billion gross investment income was generated for Simpanan Shariah, and RM8.76 billion for Simpanan Konvensional.
He said Simpanan Shariah derives its income solely from its portion of the Shariah portfolio while income for Simpanan Konvensional is generated by a share of both the Shariah and conventional portfolios.
Commenting on the outlook for the year, Mohamad Nasir said the EPF expects the global market to remain volatile in view of sentiments that are largely dominated by the ongoing US-China trade war, which seems to be reheating.
"Rising geo-political risks and uncertainty over the policy direction of major central banks will likely add further sustained pressure on the global economy in the coming months.
"As with other businesses, the EPF's investments will be affected by these global risks, but we have our strategic asset allocation to guide us. We will focus on meeting the 10% allocation for real estate and infrastructure as part of our diversification plan, and we will deploy more cash into alternative assets to maximise returns," he said.
He added that the Bank Negara Malaysia's move to reduce the overnight policy rate (OPR) is expected to have a positive impact on the economy and help offset any economic downside.
"We are optimistic of delivering a real dividend of at least 2% over a rolling three-year basis. Market downturns do have an advantage as during these times, we will take the opportunity to purchase fundamentally strong stocks at attractive prices," he said.