Kuala Lumpur: The Employees Provident Fund (EPF), ranked among the biggest pension funds in the world, aims to invest a fifth of its assets abroad by 2014.
Read more: EPF's global push for higher returns http://www.btimes.com.my/articles/20111128001800/Article/#ixzz1eybc898p
This means that it could invest another RM55 billion in international markets over the next few years, said Dr Chua Hak Bin, Bank of America Merrill Lynch director of global research. At the end of 2010, the EPF had invested nearly a tenth of its funds abroad. With a size of RM462.5 billion, the EPF is ranked third in the world when measured against the size of Malaysia's economy. Based on just total assets, the EPF is fifth behind peers in Japan, Norway, South Korea and Canada. The EPF's sheer size is getting in the way of it making good returns in the local market and it will have to go outside. "Only international diversification offers scope for a and#8216;free lunch' and to push out the frontier for higher returns with less risk, in our view," Chua said. The last quarter of 2010 saw the EPF starting to invest in global sukuk (US$1 billion) and global properties with two commercial buildings in the UK worth some and#163;331 million (RM1.63 billion). Diversification will reduce concentration risk and raise average returns, giving higher potential returns to EPF holders. Easing the EPF's heavy presence in domestic capital markets will also reduce captive demand, especially for both government bonds and equities, and help develop a more active secondary market. The EPF is already the largest owner and player in Malaysia's debt and equity markets. Its equity holding is about RM163 billion, or 19.2 per cent, of the KLCI market capitalisation of RM850 billion. "Its omnipresence and continuous support of the equity market have probably made the KLCI one of the more defensive markets in the region, with a significantly lower beta." The EPF will continue receiving a lot of money from members. Both wages and the labour force are rising and contributions grew 12.1 per cent to RM38.6 billion in 2010, the highest over the past five years. Chua expects contributions to grow by at least the same pace, if not higher, this year. He reckons that the EPF is seeing net annual contributions of RM12.2 billion last year of which a third or about RM4 billion is flowing into equities and a quarter or about RM3 billion in Malaysian Government Securities (MGS).
Read more: EPF's global push for higher returns http://www.btimes.com.my/articles/20111128001800/Article/#ixzz1eybc898p
This means that it could invest another RM55 billion in international markets over the next few years, said Dr Chua Hak Bin, Bank of America Merrill Lynch director of global research. At the end of 2010, the EPF had invested nearly a tenth of its funds abroad. With a size of RM462.5 billion, the EPF is ranked third in the world when measured against the size of Malaysia's economy. Based on just total assets, the EPF is fifth behind peers in Japan, Norway, South Korea and Canada. The EPF's sheer size is getting in the way of it making good returns in the local market and it will have to go outside. "Only international diversification offers scope for a and#8216;free lunch' and to push out the frontier for higher returns with less risk, in our view," Chua said. The last quarter of 2010 saw the EPF starting to invest in global sukuk (US$1 billion) and global properties with two commercial buildings in the UK worth some and#163;331 million (RM1.63 billion). Diversification will reduce concentration risk and raise average returns, giving higher potential returns to EPF holders. Easing the EPF's heavy presence in domestic capital markets will also reduce captive demand, especially for both government bonds and equities, and help develop a more active secondary market. The EPF is already the largest owner and player in Malaysia's debt and equity markets. Its equity holding is about RM163 billion, or 19.2 per cent, of the KLCI market capitalisation of RM850 billion. "Its omnipresence and continuous support of the equity market have probably made the KLCI one of the more defensive markets in the region, with a significantly lower beta." The EPF will continue receiving a lot of money from members. Both wages and the labour force are rising and contributions grew 12.1 per cent to RM38.6 billion in 2010, the highest over the past five years. Chua expects contributions to grow by at least the same pace, if not higher, this year. He reckons that the EPF is seeing net annual contributions of RM12.2 billion last year of which a third or about RM4 billion is flowing into equities and a quarter or about RM3 billion in Malaysian Government Securities (MGS).
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