KUALA LUMPUR: An analyst said the Employees Provident Fund (EPF) should consider allocating more funds to external fund managers given the record total income they brought in for 2023.
EPF in a statement yesterday said external fund managers posted a record total income of 22 per cent of overall income in 2023, despite uncertain and challenging markets.
As at Dec 31, 2023, a total of RM189 billion were outsourced to external fund managers to be invested in equity and fixed income instruments.
UCSI University Malaysia Associate Professor - Finance and Research Fellow at CME Dr. Liew Chee Yoong said external fund managers often have specialised knowledge and access to a broader range of investment opportunities and leveraging their expertise can lead to better investment decisions and potentially higher returns.
The strong performance of external fund managers in 2023 suggests that these managers can deliver substantial returns.
Liew added that increasing the allocation to external fund managers can significantly enhance EPF's diversification and resilience against market volatility.
"However, it is vital to ensure that the chosen managers are skillful at handling volatile markets and that their strategies align with EPF's risk tolerance and long-term objectives. The decision to increase the proportion of assets managed by external fund managers should be driven by a thorough analysis of past performance, potential risks and the strategic alignment of external managers with EPF's goals. While the diversification and potential for higher returns are justifiable, maintaining robust oversight and governance will be crucial to safeguard the interests of EPF members," Liew added.
"Increasing the allocation could capitalise on this success," he said.
A move to increase the allocation however, should be balanced with rigorous oversight and cost management, Liew said.
"A gradual increase, coupled with continuous performance monitoring, could be a prudent approach, " Liew added.
The EPF yesterday recognised 11 winners at the EPF External Fund Managers Awards 2023.
The awards are in recognition of the EPF's panel of external fund managers' outstanding performance in their respective mandates that are assessed based on sets of quantitative metrics.
Amundi and its affiliates bagged four awards, incuding Best EPF Global Equity Fund Manager, Best EPF External Fund Manager for the year.
Notably AIIMAN Asset Management Sdn Bhd won Best Domestic Equity Fund Manager for Shariah, while Pheim Asset Management Sdn Bhd won Best Domestic Equity Fund Manager (Conventional) 2023.
BNP Paribas Asset Management won Best Global Bond Fund Manager 2023.
For the financial year ended 2023, the EPF delivered a dividend rate of 5.50 per cent with a payout of RM50.33 billion for Simpanan Konvensional; and 5.40 per cent with a payout of RM7.48 billion for Simpanan Shariah.
Cumulatively, the total payout for 2023 was RM57.81 billion.
This achievement, EPF chairman Tan Sri Ahmad Badri Mohd Zahir said in a statement yesterday, was also attributed to the fund managers' diversification into different asset classes, markets and currencies that had helped the EPF to maintain resilience against market volatilities and safeguard its investment returns.
As at December 2023, the size of the EPF's investment assets stood at RM1.14 trillion, firmly positioning the EPF as one of the top 10 largest sovereign pension funds in the world.
In the coming years, the EPF will continue to explore new strategies and partner with leading domestic and global fund managers to deliver optimised returns.
"In addition to maximising its portfolio-level risk-adjusted returns, the EPF also seeks to empower all its investee companies and external fund managers to deliver positive societal and environmental impacts. Their demonstrated dedication to creating lasting values has contributed to the success of the EPF in delivering sustainable returns as the EPF protects members' retirement well-being," added Ahmad Badri.