KUALA LUMPUR: Venturing into the global markets is the best approach for the Employees Provident Fund (EPF) to ensure comprehensive improvement in the long run, economists said.
They are optimistic about the EPF's performance in the upcoming quarters after posting a higher investment income year-on-year in the first three months of 2023, with overseas operations fuelling the results.
The fund recorded a three per cent increase in investment income to RM15.16 billion in the first quarter of 2023 from RM14.77 billion a year ago.
The EPF's overseas investments, which consisted mainly in equities, continued to outperform and add value to its overall return, generating RM7.04 billion in income. This represented 46 per cent of the total investment income.
Domestic investments, accounted for 63 per cent of the total assets that were mainly invested in held-to-maturity fixed income instruments, continued to provide long-term income stability through interests and profits.
The EPF's overall investment assets as at March 2023 grew to RM1.04 trillion, with overseas investments accounting for 37 per cent.
"The EPF remains dedicated to supporting and contributing to the growth of the home economy, by continuing to allocate more than 70 per cent of its new investment annual allocation to the domestic market," it said.
Bank Muamalat Malaysia Bhd chief economist and head of social finance Mohd Afzanizam Abdul Rashid said the global markets accounted for 59 per cent of the EPF's total asset allocation.
He is optimistic about the EPF's future performance due to its overseas exposure, alongside discipline, good governance as well as high competencies among the investment team.
Afzanizam said the EPF was able to collect more contributions from its members due to the improving labour market condition, in light of the ongoing recovery within the domestic economy.
It had managed to attain new members and employers registration of 116,423 and 24,841 respectively during the first quarter of 2023 (1Q23), he added.
This led to a higher contribution of RM25.83 billion during the period, which he said was the highest quarterly contribution since the pandemic.
Afzanizam added that the ratio of active members to non-active members had risen from 51:49 in 1Q22 to 53:47 in 1Q23, indicating a rising number of Malaysians had gotten retirement coverage from the EPF.
"In that sense, the EPF has delivered a decent performance despite having to contend with multi-facet challenges, be it from heightened global economic uncertainties to volatile financial markets and changing landscape in the labour market.
"Going forward, the economic uncertainties and extreme volatility stemming from the restrictive global monetary policy to elevated level of inflation will potentially have an adverse impact to EPF investment return performance," he said.
Meanwhile, the EPF chief executive officer Datuk Seri Amir Hamzah emphasised the significance for the fund to consider the broader market in its effort to improve its prospects in order to provide a consistent dividend to its members.
"The remaining quarter will see the EPF focusing on industries and sectors that are expected to recover after three years of the pandemic, which would result in higher labour demand," he added.