Malaysia’s Employees Provident Fund (EPF) invested $1.3 billion in global real estate, bonds and equities in the first quarter of 2013, raising its total overseas allocation to 17.55%, from roughly 14% nearly a year ago.
The pension fund's assets also received a boost, ticking up 9.86% to RM536.55 billion ($177 billion) as of March 31 from RMB488.39 billion at the same date last year.
Increasing foreign investment has been on the cards for a while, with EPF telling AsianInvestor last June that real estate, infrastructure and Islamic and conventional bonds were particularly of interest.
EPF's investment assets have been steadily increasing by 8% to 9% annually. This makes it even more imperative for the fund to find “suitable investments globally that fit [its] long-term diversification programme”, says recently appointed chief executive Shahril Ridza Ridzuan.
However, the investment team will continue to be selective in its allocations, he notes. “While we are boosting the fund’s overseas investment, we remain vigilant and cautious on the choice of investment to ensure that our investments remain within our risk-return profile."
EPF’s real estate and infrastructure income increased by over 200% to RM227.19 million in the first quarter from RM74.34 million in the same period last year. Income on its equity portfolio fell to RM1.86 billion from RM3.57 billion, however, which the EPF attributes to lower domestic market trading volume compared with the same period last year.
Given the fragility of the global economy, the constraints of Malaysia's capital markets and the low interest rate environment, EPF warns that “it will not be an easy task to sustain the current level of investment performance in the quarters to come”.
Still, an increase in foreign interest in the country following the Malaysian ruling coalition’s return to power earlier this month will lead to a pick-up in trading activities in the second quarter, Ridzuan says.