Malaysia Pension Fund Returns 7.64% in Q2

Slumping investments in emerging markets dampen returns.

Malaysia’s RM813.18 billion ($196.43 billion) Employees Provident Fund (EPF) reported a 7.64% increase in quarterly total investment income to RM12.39 billion for the second quarter ended June 30, from RM11.51 billion recorded during the same period last year.

The value of EPF investment assets reached RM813.18 billion, which was a 0.38%or RM3.05 billion increase, from the end of 2017, but a marginal decline from the first quarter of 2018 due to the drop in equity markets.

Disappointing returns from emerging market investments prevented the fund from reporting higher returns for the quarter.

“The escalating US-China trade tensions and the US interest rate hike contributed to capital outflows from emerging markets, including Malaysia,” EPF Deputy CEO Dato’ Mohamad Nasir Ab Latif said in a release. “While some developed markets, including the US and Eurozone countries, recorded gains in their equity markets, the emerging markets, which include Asia, recorded negative returns.”

He added that investments from Association of Southeast Asian Nations (ASEAN) were among the worst performers for the fund.

“Nonetheless, the diversification into different markets and sectors has enabled the EPF to record consistent performance with equities emerging as the main contributor during the second quarter,” he said.

Out of the fund’s total investment assets, 39.71%, or RM322.89 billion, were in Shariah-compliant investments, while the remainder was invested in the conventional portfolio.

A total of RM1.09 billion out of the RM12.39 billion gross investment income was generated for Simpanan Shariah, and RM11.30 billion for Simpanan Konvensional. Simpanan Shariah derives its income solely from its portion of the Shariah portfolio, while income for Simpanan Konvensional is generated by its share of both Shariah and conventional portfolios.

Equities, which made up 40.61% of the fund’s total investment assets, contributed RM7.98 billion, representing 64.44% of total investment income for the quarter.

Fixed income investments, which account for 52.09% of the fund’s portfolio, returned income of RM4.09 billion, equivalent to 33.07% of the quarterly investment income. And income from Malaysian Government Securities (MGS) and  Equivalent increased to RM2.40 billion during the quarter, while loans and bonds generated RM1.70 billion in investment income.

Money market instruments, which represent 2.53% of the fund’s total investment assets, contributed RM215.44 million in investment income, while real estate and infrastructure investments earned RM91.73 million in investment income for the quarter. Capital gains on disposal of equity totaled RM3.79 billion for the quarter

As of the end of June, the EPF’s overseas investments, which accounted for 26.5% of its total investment assets, contributed 38.3% to the total investment income during the quarter.

“Global market uncertainty continues to shroud the outlook for the rest of the year,” Nasir said, “given the continued political and policy risks such as the impending changes to monetary policies, uncertainty over the outcome of Brexit and the ongoing trade tensions between major trading nations.”

The fund also reported a 9.99% increase in contributions received during the quarter to RM18.17 billion, compared with RM16.52 billion during the same quarter last year. This raised the total accumulated members’ contributions to RM780.07 billion, up 9.55% from the RM712.04 billion reported a year earlier.

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