EPF cautious on dividend targets

KUALA LUMPUR- The Employees Provident Fund (EPF) is cautious on its annual goal of achieving its dividend rate target of inflation plus 2%, having to contend with volatile market movements since the middle of 2015, said its CEO Datuk Shahril Ridza Ridzuan.EPF’s asset allocation is 50% in fixed- income instruments – mostly investment-grade bonds and government sovereign bonds, 40% in equities, 2% in private equity and 8% in alternatives such as real estate and infrastructure.

“For a retirement fund like EPF, what’s important is not so much looking at the absolute dividend that we declare, it’s always the spread on inflation, on Malaysian Government Securities (MGS) or on fixed deposits. If you look at the last five years of EPF, in terms of our financial performance, we’ve always been able to deliver roughly about inflation plus 3% to inflation plus 3.5% and our target has always been inflation plus 2%,” he told reporters at the EPF Global Private Equity Summit 2015 yesterday.

Shahril said the dividend will depend on its performance in the second half of the year and it remains cautious due to the sharp downturn in the second half of the year, in addition to the China slowdown and depressed commodity prices.

“We have already announced our results for the first half of this year which were pretty decent, but given where the markets have moved since the middle of the year, we would be cautious about giving any prediction for the year as a whole ... as you know it has been a fairly difficult year for the markets. Bursa Malaysia itself is down by nearly 10% plus since the start of the year, and that same weakness is being seen in all markets around the world,” he added.

On the impact of the ringgit, deputy CEO (investment) Mohamad Nasir Ab Latif said EPF has been investing outside of Malaysia for a while now at rates when the ringgit was much lower.Nasir said it is always on the lookout for investment opportunities but will still stick by its prudent asset allocation principle and take a long-term view when picking up opportunities.

“We have an asset allocation that has been designed in such a way to take us through good and bad times. It doesn’t mean that when the market is down, we will go out rushing and totally increase (foreign asset size), we will stick to our proven asset allocation strategy. There may be slight tactical changes here and there but we will not go too far out,” he added.Shahril said the fund buys and sells assets all the time but it depends on the price and timing as well as opportunities to reinvest if it disposes off an asset.

“The Reading Business Park is one of the assets that we own in the UK. Like I said, it’s one of the assets that we always look at in terms of whether or not the time has come for us to dispose of it. At this time, we have not made any announcement on whether we are disposing of it. It really depends on whether we get the right offer and the right pricing,” he said.Overseas assets make up 26% of EPF’s investment portfolio.

Senior general manager of the private markets department Mohamad Hafiz Kassim said it is very new in the private equity space and will focus on building capabilities, especially Asian private equity space and building its expertise through investing in private equity funds. It is also cautiously looking at co-investments with other private equity fund managers.-TheSunDaily