EPF's 2016 dividend tops average return of sovereign wealth funds

KUALA LUMPUR: The Employees Provident Fund (EPF) has delivered good results despite the challenging global financial markets in 2016 to outperform the average return of sovereign wealth funds (SWFs).

The EPF paid out a 5.7% dividend for 2016 whereas the average return of SWFs was 4.2% last year, according to IQI Group Holdings chief economist/investment strategist, Shan Saeed.

“If I were to compare the EPF’s performance with other funds such Qatar’s state-owned sovereign wealth fund, the Qatar Investment Authority, the largest US public pension fund, California Public Employees’ Retirement System, and the Government Pension Fund of Norway, the EPF has done considerably well with dividend payments and lived up to the promise to its contributors,” he said.

On the EPF’s dividend announcement on Saturday, Shan said the pension fund’s management has demonstrated professionalism and financial market acumen in delivering good results.

“The reason is that the EPF is well diversified in various asset classes and regions which are mandatory requirements for smart asset portfolio strategy,” said Shan.

With the alchemy of finance changing at a fast pace and equity/bond markets getting volatile due to new norms, Shan said, the EPF should look at its long- and short-term horizons between strategic and tactic assets allocation.

“The EPF has to be aware of the dynamic variables that change the norms. Geopolitical risks have become the biggest factor having impact on global financial markets,” he said.

Shan said as most SWFs are chasing returns as markets are getting more turbulent, the key strategy for them would be to keep revisiting their asset portfolio strategy and aligning it according to market forces.

SWFs globally hold US$8.2 trillion (RM36.5 trillion) in assets, and 29% of those are held in real estate.

Real estate has become the new global currency, he said.

Meanwhile, the Malaysian Institute of Economic Research said the 5.70% dividend rate declared by the EPF for 2016 is reasonable, given the uncertainty in the economy, both globally and locally.

Its executive director, Dr Zakariah Abdul Rashid, said the rate is lower than the previous year’s as the local equity market underperformed.
“About 70% of the EPF’s total investment assets are domestic-based, especially in equities, but market was not good last year.

“Thanks to the EPF’s diversification, its overseas investments, which made up about 29% of total investment assets, contributed 39% of the gross investment income last year,” he said.

Zakariah said the EPF’s current management has demonstrated discipline and professionalism in line with its objective as a long-term investor to provide consistent returns for the members.

He added that it will be interesting to check the pension fund’s performance for 2017, as that beginning from this year, the results will be broken down into conventional savings and syariah savings for the quarterly and annual results announcements. – Bernama