Malaysia pension fund to grow foreign exposure: RE chief

While the Employees Provident Fund continues to see potential at home, its head of real estate investment says the domestic market size and limited return opportunities dictate that it looks for global exposure.
Malaysia pension fund to grow foreign exposure: RE chief

The head of real estate investment for Malaysia’s Employees Provident Fund (EPF) says he expects the fund to continue to grow its overseas exposure, particularly in Europe and Japan.

Speaking at a conference in Kuala Lumpur entitled “Positioning Malaysian Real Estate”, Kamarulzaman Hassan, EPF’s head of global real estate, outlined some of the fund’s current experiences and its direction in terms of real estate investments.

He explained how the EPF’s global diversification came after the losses it sustained during the Asian financial crisis in the late 1990s. At the time, the fund was entirely invested in domestic assets.

Looking at the global picture, he said that despite volatile global markets, there were still opportunistic deals the fund was looking at. It was getting involved in deals in Japan, the UK, France and Germany. So far it had committed to some logistics investments but Kamarulzaman said the fund was also interested in the retail and office sectors.

The Malaysian pension fund, with approximately 14 million members, is the largest investing institution in the country and ranked at number 53 in the AI300 list of the region’s top asset owners in 2015, with $141 billion of AUM. The fund can invest up to 5% of its assets in real estate.

Kamarulzaman said he believed there were still good investment opportunities in Malaysia, particularly in the logistics real estate sector. But he said that in order to protect itself from domestic shocks and also to secure strong long-term distribution for members, the EPF must continue to look overseas: “It is more out of necessity, because we have become a big fish in a small crowded pond, with Permodalan Nasional Berhad, Lembaga Tabung Haji and KWAP."

In order for Malaysian real estate to become more attractive for large foreign funds, Kamarulzaman said there needed to be more liquidity and transparency. The market also needed a quicker and more simplified transactional process for real estate ownership transfers.

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