This article first appeared in The Edge Malaysia Weekly on August 25, 2025 - August 31, 2025

THE Employees Provident Fund (EPF) has reported one of its strongest headline investment income performances for a six-month period, about a fortnight after being questioned in parliament on its 13% year-on-year (y-o-y) decline in total investment income for the first quarter ended March 31, 2025.

Total investment income for the first half ended June 30, 2025 (1H2025) was RM38.92 billion, an increase of 3% from RM37.9 billion in 1H2024, the EPF said in a statement dated Aug 14. The amount includes RM0.44 billion in unrealised mark-to-market gains from foreign exchange fluctuations that are not distributable as dividends.

That implies an investment income of RM38.48 billion for 1H2025, excluding the unrealised gains. This would have been enough to pay a 3.3% dividend in 2024 but may be just short of being enough to pay a 3% dividend in 2025, which means the EPF needs to do better in 2H2025 to deliver a 6% dividend for the year.

A dividend of 5.5% for 2025 should be in the bag if the EPF does not fare too poorly in the July to December 2025 period.

A dividend of 6% for this year is still possible if the EPF keeps up its performance but it would likely need to do much better than 2Q2025 in both the remaining quarters to be able to match the dividend of 6.3% paid in 2024 for both conventional and shariah savings, The Edge’s back-of-the-envelope calculations show.

A high base effect on the back of tougher market and operating conditions is the simplistic layman’s answer to why the headline 1Q2025 total investment income fell 13% y-o-y.

The EPF’s distributable income for 1Q2024 of RM19.2 billion was a 33.1% increase from RM14.42 billion in 1Q2023. Similarly, its 1H2024 distributable income of RM36.7 billion was up 29% from RM28.4 billion in 1H2023. That implies a distributable income of RM17.5 billion in 2Q2024.

Recall that the EPF only paid a 5.5% dividend for conventional savings and a 5.4% dividend for shariah savings in 2023 before surprising on the upside with a 6.3% dividend for all members in 2024 — an achievement somewhat overshadowed by the debate over the timing of its divestment of Malaysia Airport Holdings Bhd (MAHB) shares.

The EPF did not say why it used distributable income for 2024 but total investment income in 2025. It also included paper profits when reporting income over several quarters in 2023.

Distributable income accounts for write-downs and does not include any mark-to-market gains as paper profits cannot be distributed as dividends.

Total investment income, as used for reporting the newly announced 1H2025 numbers, however, is gross investment income that includes unrealised mark-to-market gains and has yet to account for any potential write-downs.

The EPF did not mention if there were any write-downs in 1H2025.

It also did not say how much in unrealised gains are included in the RM37.9 billion in 1H2024 but our back-of-the-envelope calculations point to RM1.2 billion, given that a year ago, the EPF said it recorded a total distributable income of RM36.7 billion for 1H2024.

Given the dissymmetry in reported numbers that may not be comparable beyond two periods, our charts are normalised on a best effort basis to compare performance over longer periods.

Compared to our dividend prediction in June following the EPF’s 1Q2025 release, the chances of a 6% dividend for 2025 have improved after its 2Q2025 performance.

At this juncture, it is unlikely the EPF will beat its 2024 dividend payout even if it manages to derive higher income this year compared with last year.

Delivering a 6% annual dividend grows more challenging year after year partly because the EPF’s fund size continues to grow from statutory contributions amid a still robust labour market and rising wages.

Although the RM73.2 billion payout in 2024 set a record high in absolute terms, the 6.3% dividend rate last year was lower than in 2017. However, the RM48.13 billion that was enough to pay a 6.9% dividend for conventional savings and 6.4% for shariah savings in 2017 would have only been able to cover a dividend of just over 4% last year and likely even less this year.

While gross contributions of RM31.32 billion in 2Q2025 were lower than RM33.54 billion in 1Q2025, the figure is still about RM4 billion higher compared with the same quarter last year. The EPF did not provide gross withdrawal numbers but, based on the Ministry of Finance’s recent disclosure to parliament, it is likely that RM3.19 billion had been withdrawn from the EPF Flexible Account 3 (10% of statutory contribution) in the past eight months between mid-December 2024 and mid-August 2025.

With a fund size of RM1.31 trillion as at end-June 2025, the EPF is on track to reach RM2 trillion by 2030.

“The EPF’s long-term diversified investment approach continues to deliver resilient outcomes with our first-half income recording an increase supported by steady market recovery, strong domestic contributions and a disciplined portfolio management approach. The increase in contributions and income led to a 5% increase in our assets under management. Our emphasis on high-quality assets, particularly in key domestic sectors, alongside disciplined asset allocation and ESG-integrated strategies, enabled us to capture opportunities while managing risks amid ongoing global uncertainty,” EPF CEO Ahmad Zulqarnain Onn said in the statement for the 1H2025 performance release.

“Notwithstanding an improved 2Q2025, the EPF remains vigilant of downside risks, including softening global trade, unpredictable trade policies, renewed inflationary pressures and shifting geopolitics. Our strategy will be one of active vigilance and prudent management, focusing on our long-term resilience to safeguard our members’ retirement savings against these external headwinds.”

According to the EPF’s latest statement, its total investment income for 2Q2025 of RM20.61 billion was 22% higher than RM16.91 billion in 2Q2024.

In August 2024, it said total distributable income for 2Q2024 after write-downs was RM17.5 billion, up 25% from RM13.98 billion in 2Q2023. That implies there being unrealised mark-to-market losses included in the total investment income for 2Q2024, which lowers the base comparison.

That said, there may also be RM0.58 billion in unrealised mark-to-market losses in 2Q2025, given that the amount of unrealised mark-to-market foreign exchange gains included in the total investment income fell from RM1.02 billion in 1Q2025 to RM0.44 billion in 1H2025, back-of-the-envelope calculations show.

Equities remain the largest contributor to investment income, generating RM13.77 billion or 66.8% of the total investment income of RM20.61 billion for 2Q2025. This is higher than 59% in 1Q2025, 42% in 4Q2024 and 61.4% in 2Q2024 but below 93% in 3Q2024, when both its money markets as well as real estate and infrastructure segments reported losses.

There was also a RM0.18 billion foreign exchange translation loss in its money market instruments segment in 2Q2025, which the EPF said was “largely denominated in non-ringgit currencies [and] were affected by the ringgit’s appreciation against the US dollar in 2Q2025”.

Fixed income contributed RM6.73 billion or 33% of total investment income for the quarter while real estate and infrastructure contributed RM0.29 billion or the remaining 1.4%.

Foreign assets made up 39% of total investment assets but generated 63% or 12.92 billion of the total investment income for 2Q2025. This is up from RM8 billion or 44% of total investment income in 1Q2025.

The Edge will update its 2025 dividend estimate when the EPF releases its third-quarter performance in November this year. 

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