Equity makes up 43% of the EPF’s total investment portfolio.
During the first quarter, the EPF saw its investment income increase 57.7% to RM8.83bil from RM5.6bil in the same quarter last year.
The expansion in asset size was also driven by net contribution from members and employers, the fund said in a statement yesterday.
The sterling performance at the start of 2014 lifted the fund’s total investment asset size by 11.3% to RM597bil from RM536.6bil a year ago.
“Based on the rapid growth in our investment assets, which average between 10% and 11% annually, we will continue to strategically diversify our long-term investment activities across different markets and sectors in accordance with our Strategic Asset Allocation (SAA),” the EPF’s chief executive officer, Datuk Shahril Ridza Ridzuan(pic), said in a statement.
“Depending on the market direction, we will continue to capitalise on opportunities that arise in order to rebalance our portfolios for risk and return optimisation,” he added.
For the period in review, equity investments accounted for 43% of the EPF portfolio, while secure and low-risk fixed-income instruments accounted for 52%, with the remainder being made up of money market instruments, real estate and infrastructure.
The EPF’s global investments contributed to about 27% of all income generated in the first quarter. The fund’s total overseas exposure during the period in review accounted for 21.22% of its total investment assets based on book value.
Despite the impressive first-quarter results, Shahril was mindful that it might not be indicative of the EPF’s full-year performance for 2014.
“Economic and market situations play a major role in influencing investment performance. Our performance in the first quarter of 2013 was affected by uncertainties ahead of the general election, and the early stages of global economic recovery had impacted our ability to achieve higher returns at that time,” he explained.
During the quarter under review, equities were the biggest income contributor to the EPF, generating an investment income of RM4.84bil, compared with RM1.86bil in the previous corresponding period.
“Earnings on equities depend on market situations, and in the first quarter of 2014, the high trading volumes and liquidity in the equity markets, particularly global developed markets, provided us with a timely opportunity to realise gains from earlier equity investments.
“In addition, we also benefited from the steady stream of dividends received from the listed companies we had invested in,” Shahril said.
Meanwhile, the EPF’s real estate and infrastructure assets posted a growth of 37.4% to RM312.2mil from RM227.2mil previously, while income derived from loans and bonds increased 4.5% to RM2bil from RM1.92bil previously due to maturing investments reinvested at lower rates, given the low interest rate regime.
The EPF’s income from Malaysian Government Securities and equivalents increased 4.4% to RM1.58bil from RM1.52bil previously, while money market instruments contributed RM79.62mil to the quarter in review.
“Although we are optimistic that the Malaysian economy will record better growth this year on expectations of export recovery supported by resilient domestic demand, we remain vigilant, particularly over the uncertainties surrounding the movements of capital as long-term interest rates adjust following recovery in key markets,” Shahril said.