KUALA LUMPUR (June 9): The Employees Provident Fund (EPF) recorded a 3% year-on-year (y-o-y) increase in investment income to RM15.16 billion for the first quarter ended March 31, 2023 (1QFY2023), from RM14.77 billion previously.
The RM15.16 billion was recorded after netting off listed equity write-downs during the quarter, it said in a statement on Friday (June 9).
The EPF said income from equities increased to RM8.96 billion, after netting off write-downs, compared with the RM8.75 billion recorded for 1QFY2022. It said the asset class remained the top income contributor at 59% of total investment income.
“Write-downs in 1QFY2023 were minimal at RM440,000, compared with the RM1.09 billion recorded a year earlier, attributed to active portfolio management by EPF fund managers,” the pension fund said.
Cost write-down is an internal policy adopted by the EPF for its listed equity investments as a prudent measure to ensure its portfolios remain healthy, the fund said.
The EPF added that fixed income instruments, comprising Malaysian Government Securities (MGS) and equivalent, as well as loans and bonds, contributed 32% or RM4.79 billion of investment income for 1QFY2023.
“Both MGS and Government Investment Issues (GIIs) rallied during the quarter, as overall benchmark yields declined with easing inflationary expectations in the US, providing opportunities for the EPF to capitalise on trading gains,” it said.
Fixed income instruments, which serve as capital preservation, have been the anchor for the retirement fund, providing a steady stream of income, and mitigating the impact of short-term market volatility on the EPF’s overall income.
Meanwhile, it said the portfolio of real estate and infrastructure registered an increase in income to RM0.92 billion for 1QFY2023, while income from money market instruments rose to RM0.49 billion from RM0.28 billion for 1QFY2022, in line with its return expectations.
EPF's investment assets grew to RM1.04 trillion
The EPF said its overall investment assets grew to RM1.04 trillion as at March 2023, with overseas investments accounting for 37% of total assets.
The fund's overseas investments, which were mainly in equities, continued to outperform and add value to the overall return, as they generated RM7.04 billion in income, representing 46% of the total investment income recorded, it said.
As for the EPF’s domestic investments that account for 63% of total assets mainly invested in held-to-maturity fixed income instruments, it said they continued to provide long-term income stability through interests and profits.
“The EPF remains dedicated to supporting and contributing to the growth of the home economy by continuing to allocate more than 70% of its new investment annual allocation to the domestic market,” it said.
The fund said a total of RM13.33 billion out of the RM15.16 billion investment income was generated for Simpanan Konvensional, followed by RM1.83 billion for Simpanan Shariah.
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.
“Despite the challenges in 1QFY2023, marked by persistent supply-chain disruptions and elevated financial vulnerabilities, including the collapse of Silicon Valley Bank and Signature Bank in the US, the EPF managed to sustain the consistency of its performance for the quarter,” said EPF chief executive officer Datuk Seri Amir Hamzah Azizan.
He attributed the latest quarterly performance to continuous healthy returns recorded by global equities for the reporting period that were buoyed by expectations of a shallow recession in the developed markets, and rising optimism about China’s reopening.
“While returns have been positive so far this year, financial markets have remained volatile, with geopolitical tensions and high inflation continuing to be key concerns for major markets worldwide. In response to the situation, the EPF has focused its equities portfolio strategy towards resilient and fundamentally sound companies with stable dividend payouts,” Amir said.