DESPITE the Covid-19 crisis in 2020, the Employees Provident Fund (EPF) ended the year with a gross investment income of RM60.98 billion, the highest in its history.

Of the sum, RM6.15 billion went into shariah savings.

The pension fund’s overall assets grew by 7.9% to RM998 billion, with the market value hitting RM1.02 trillion at the end of last year. 

EPF attributed the strong performance to its prudent approach as guided by the overall Strategic Asset Allocation (SAA), which helped it stay resilient despite the unanticipated crisis. 

Outgoing chief executive officer Tunku Alizakri Alias said in a media briefing today that the fund saw commendable returns across all asset classes.

The fund earlier announced 5.20% dividend for conventional savings and 4.90% for shariah savings for last year.

“We made history again, we recorded RM60.98 billion in gross investments which is a marked increase from the past three years of our investment,” Tunku Alizakri said.

The fund’s return on investment for 2020 stood at 6.13%.

Prior to 2020, the fund saw a record-high gross investment income in 2017, when it registered RM53.14 billion.

In terms of asset classes, fixed-income instruments formed a bulk of its investments at 46%, followed by equities at 42%. 

Meanwhile, real estate and infrastructure as well as money market instruments made up 5% and 7% respectively.

As at end of last year, the EPF’s overseas investment assets made up 33% of its portfolio.

Equities, particularly foreign equities, continued to be the driver of returns with a total income of RM28.71 billion. 

The private equity portfolio also showed strong performance with a consistent income distribution.

Although, leading stock indices lost as much as 40% in the first quarter, the EPF took the opportunity to rebalance its portfolio by acquiring shares that were fundamentally strong at attractive prices. 

The recovery in the second-half of the year which improved global and domestic markets also contributed significantly to the EPF’s investment portfolios, paving the way for profit-taking opportunities, particularly in the fourth quarter of the year.

The EPF also took prudent measures to write down RM7.71 billion of its listed equity portfolio, to ensure that its long-term investment portfolios remain healthy.

The Money Market portfolio recorded an income of RM1.19 billion.

Tunku Alizakri said the returns in this asset class was lower because of the i-Lestari and i-Sinar withdrawals which required the fund to have enough liquidity, albeit for a short period of time.

Withdrawals from the i-Lestari facility by 5.16 million members amounted to RM18.1 billion. 

Other measures implemented by the fund included allowing members to lower their mandatory statutory contribution to EPF savings to 7% from 11%, from April 2020 to December 2020.

EPF managed to maintain stable returns for its Fixed Income instruments, comprising of Malaysian Government Securities and Equivalent and Loans and Bonds, while at the same time capturing opportunities to realise profit as interest rates declined.

As such, this asset class recorded an income of RM25.42 billion, accounting for 42% of the fund’s total gross income.

Meanwhile, the Real Estate and Infrastructure portfolio’s saw some challenges in the form of lockdown measures and work-from-home requirements, resulting in lower income from certain segments of the real estate sector. 

For the year 2020, the segment recorded an income of RM5.66 billion.

Commenting on the outlook for 2021, EPF chairman Ahmad Badri Mohd Zahir said the vaccine rollouts will have an important bearing on the outlook.

“The vaccine rollout in 2021 will have important bearing on the outlook for the year, as we are also cognisant of new strains of Covid-19 that are easily transmitted,” he said.

“However, we believe that the situation is being well-managed, with governments everywhere ensuring that the vaccines get to people as efficiently as possible. In Malaysia, the first batch of vaccines have arrived and will soon be administered to the population.

“The EPF, being a 70-year-old institution and one of the oldest pension funds in the world, will remain focused on our mandate to help members have enough savings for a sustainable retirement. We will also embark on a new withdrawal scheme to allow members to purchase insurance or Takaful products that was announced in Budget 2021, slated for an end-of-year rollout,” he added.

Ahmad Badri said the Covid-19 pandemic has revealed that urgent solutions to be need to be implemented within a short period of time. 

“As we work towards safeguarding and growing our members’ retirement savings in a volatile and uncertain environment, our emphasis on Environment, Social, and Governance (ESG) investing will serve as an anchor and an effective risk mitigation tool, as well as being value drivers for our investments that will create social impact that could last beyond financial returns,” he said. – February 27, 2021.