EPF’s shariah portfolio’s stronger returns driven by US tech rally

Monday 20 May 2024

SHAH ALAM (March 3): The performance in the Employees Provident Fund’s (EPF) shariah portfolio was driven by the rally of US technology equities, according to EPF chief executive officer (CEO) Ahmad Zulqarnain Onn.

The EPF’s dividend rates for conventional of 5.5% and shariah savings of 5.4% converged to a differential of just 0.1 percentage points (ppt) for 2023, versus a differential of 0.6 ppt in 2022 — based on conventional and shariah rates of 5.35% and 4.75% respectively.

The EPF’s conventional portfolio logged a gross return on investment (ROI) of 6.49% in 2023 versus 6.46% in 2022, while the shariah portfolio’s ROI stood at 6.14% in 2023 versus 5.83% in 2022.

In addressing the converging dividend rates, Ahmad Zulqarnain explained that the fund’s shariah portfolio saw an increase in returns on the back of the rally seen in US technology equities.

“In particular, they converged because if we look at the stock market, and in particular in the US, a lot of the performance was driven by the magnificent seven — which are the largest technology companies — including the stellar Nvidia, driven by generative AI,” Ahmad Zulqarnain said during the EPF’s financial performance briefing on Sunday.

“A large number of technology companies are shariah-compliant, so therefore, because they were in the shariah portfolio, we saw that increase in returns in the shariah portfolio,” he added.

Meanwhile, he reiterated that starting January 2024, the EPF has split its conventional savings and shariah savings portfolio into two separate portfolios.

This is to give its portfolio managers flexibility, as well as take into account the differing performance of shariah-compliant and non-compliant assets’ performance during the year, according to Ahmad Zulqarnain.

“As you can appreciate, in the shariah portfolio for example, it is very difficult to have financial services exposure because from a global basis, the availability of shariah-compliant financial services companies is very, very limited.

“Therefore, we then have to replace that exposure with something else, and separating the two gives us greater flexibility in managing the assets,” he added.

Edited BySurin Murugiah

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