KUALA LUMPUR: The weaker ringgit, higher policy rate and uncertain market conditions may not pose significant impact on the investments and income of the Employees Provident Fund.
Chief strategy officer Nurhisham Hussein said the EPF's asset allocation strategy adapts to any changes and uncertainties in the economy.
"Our asset allocation is designed to address the ups and downs of the market and interest rate fluctuations. If there is an impact on one asset class, another asset class may rise. So in terms of income, the EPF is not significantly affected.
"If all markets decline, then (income) is affected, but currently the international market performance is good," he said in an interview with Berita Harian recently.
Nurhisham said despite the current decline in the Malaysian stock market, the EPF is always looking for opportunities to buy attractive assets at favourable prices.
"We can indeed generate income. (In this situation) it is an opportunity for the EPF to buy because they are cheap. Normally, we are always buying and selling, not buying a lot at one time or buying a little at another time, we are always trading.
"I think the (Malaysian) market valuation is low, but we have a strategy that is not focused on a particular asset," he added.
On the impact on EPF investments in the event of an increase in OPR, he explained that some assets will experience an increase while others will decline.
"Banks (shares) will increase slightly if the OPR rises, while others will experience a slight decrease. It depends on which assets have a lot of debt.
"We need to look at which companies have a lot of debt, and they will be slightly affected. But companies are 'smart'. Not all loans are made at variable interest rates, some are fixed, so they are not affected," he said.
Investment income, equity rise
For the first quarter ended March 31 this year, the EPF recorded investment income of RM15.16 billion, a three per cent increase from RM14.77 billion recorded in the same quarter of 2022.
The amount is after taking into account the decline in the fair value of listed equities recorded for the respective quarter.
During the quarter, income from equities increased to RM8.96 billion, after considering the decline in fair value, from RM8.75 billion recorded a year ago.
This asset class remains the highest contributor to the EPF's income, accounting for 59 per cent of the total investment income.
Fixed income instruments, which serve as capital preservation and provide a stable income stream for the EPF, in addition to reducing the impact of short-term market uncertainties and providing stability to overall income, continue to play a significant role.
This asset class, consisting of Malaysian Government Securities and equivalent bonds as well as loans and bonds, contributed 32 per cent or RM4.79 billion to the gross investment income for the first quarter of 2023.
Property and infrastructure also recorded an increase in income to RM920 million in the first quarter of 2023.
Income from money market instruments rose to RM490 million from RM280 million in the first quarter of 2022, in line with the expected returns set for this asset class.