KUALA LUMPUR: THE Employees Provident Fund (EPF) plans to increase its allocation for overseas investments by two per cent to 32 per cent by the end of 2019.
“Based on our strategic asset allocation (SAA) for this year to 2019, the optimal allocation for overseas investments is 32 per cent,” said its deputy chief executive officer of investment Datuk Mohamad Nasir Ab Latif.
“Therefore, we hope that we will be able to reach our target,” he told NST Business recently.
On EPF’s overseas investment, 17 per cent was in the United States, with the remaining in 39 other countries.
“The total investment in the US is equivalent to less than five per cent of EPF’s assets. Of the 30 per cent invested oversea, 71 per cent is in listed equities, 13 per cent in fixed income and 16 per cent in alternative investment,” said Nasir.
However, he said EPF’s new investments overseas were limited by the restrictions imposed on local institutions.
“As a pension fund, EPF focuses on getting overseas investments for long-term returns.
“The allocation of 32 per cent is optimal, considering the EPF’s investment asset size, the growth and opportunities available in the domestic capital market and the risk return profile of overseas assets.”
He said increasing the overseas exposure to the optimal 32 per cent, however, had proved to be a challenge due to regulatory constraints.
EPF’s third-quarter investment income ended September 30 rose 5.13 per cent to RM12.95 billion from RM12.32 billion in the same period a year ago.
Nasir said as at September, total investment value for local and overseas investments was RM540 billion and RM231 billion, respectively.
During the quarter, Nasir said EPF’s overseas investments contributed 48 per cent to the total investment income.
On whether the stronger ringgit would impact EPF’s foreign exchange gains, he said EPF had benefited from the rally in the overseas equity markets in the third quarter of this year.
“Diversification into different asset classes in various countries and currencies helped EPF to mitigate the impact of the ringgit’s strengthening against the US dollar,” he said.
Nasir said at the current valuation of ringgit, it was a good time for institutions such as the EPF to make new investments compared with the past two years when ringgit was weaker.
“It should be noted that the EPF is focused on long term and stable returns rather than short-term gains from its investments,” he added.