EPF's Q3 investment income up 5%, thanks to global equities rally

PETALING JAYA: The Employees Provident Fund (EPF) registered a 5.13% increase in investment income to RM12.95 billion for the third quarter ended Sept 30, 2017 from RM12.32 billion a year ago.
“The EPF’s overall portfolio performance benefited from the rally in overseas equity markets in Q3 2017. We did not see similar returns from the domestic equities market as the FBM KLCI’s performance was flat compared to other markets, which recorded between 2% and 5% growth,” deputy CEO of investment Datuk Mohamad Nasir Ab Latif said in a statement on Wednesday.
The EPF recorded higher net impairment of RM791.55 million during the quarter, compared with RM349.59 million a year ago due to the higher provision recorded for domestic equities in the telecommunications and oil and gas sectors.
Equities, which made up 41.86% of the EPF’s total investment assets, contributed RM7.91 billion of income or 61.09% of the total investment income. The income recorded was 12.75% higher than RM7.02 billion posted a year ago.
As at September 2017, a total of 50.45% of the EPF’s investment assets were in fixed income instruments which recorded an income of RM4.49 billion, equivalent to 34.63% of the total quarterly investment income.
Of the RM4.49 billion, Malaysian government securities (MGS) and equivalent stood at RM2.17 billion, an increase of 10.96% from RM1.95 billion a year ago, in line with the growth of the portfolio.
However, loans and bonds generated lower investment income of RM2.32 billion compared with RM2.56 billion a year ago.
Investments in money market instruments and real estate and infrastructure each represented 3.53% and 4.16% of total investment assets, and contributed an investment income of RM274.27 million and RM263.83 million respectively during the quarter.
“Our current investment in money market instruments is above the targeted 3% under the Strategic Asset Allocation due to ongoing regulatory restrictions in new overseas investments. Over the long run, the EPF must continue to expand our foreign assets portfolio as it is key to our diversification and allows us to meet our return targets,” said Mohamad Nasir.
As at Sept 30, 2017, the EPF’s overseas investments, which accounted for 30% of its total investment asset, contributed 48% to the total investment income during the quarter.
Diversification into different asset classes in various countries and currencies had helped the EPF to record higher income for the quarter, despite significant differences in market performance globally.
Out of the total RM12.95 billion investment income for Q3 2017, a total of RM860.83 million was allocated for Simpanan Shariah, which derives its income solely from its portion in syariah assets, while RM12.09 billion income was allocated for Simpanan Konvensional, which is generated by its share of both syariah and non-syariah assets.
The value of the EPF’s investment assets rose 5.48% to RM771.20 billion from RM731.11 billion as at Dec 31, 2016. Of the total investment assets, RM370.10 billion or 48% were in syariah-compliant investments and the balance in non-syariah assets.