THE Employees Provident Fund’s (EPF) investment income rose 3% to RM15.16 billion for the first quarter ended March 31, 2023 (1Q 2023), from RM14.77 billion recorded in the corresponding quarter last year.

The amount was after netting off listed equity write-downs recorded for the quarter, EPF said in a statement today.

The fund said during the quarter under review, income from equities increased to RM8.96 billion, after netting off write-downs, compared with the RM8.75 billion recorded in 1Q 2022.

It said the equities asset class remained the top income contributor at 59% of total investment income.

“Write-downs for 1Q 2023 were minimal at RM0.44 million compared to the RM1.09 billion recorded in the same quarter of 2022, attributed to active portfolio management by EPF fund managers.

“Cost write-down is an internal policy adopted by the EPF on its listed equity investments as a prudent measure to ensure its portfolios remain healthy,” it said.

EPF said fixed income instruments, which serve as capital preservation, have been the anchor for the EPF, providing a steady income stream and mitigating the impact of short-term market volatility on the EPF’s overall income.

This asset class, which comprises Malaysian Government Securities and Equivalent (MGS), as well as loans and bonds, contributed 32% or RM4.79 billion to investment income for 1Q 2023.

“Both MGS and Government Investment Issues (GII) rallied during the quarter as overall benchmark yields declined with easing inflationary expectations in the US, providing the opportunity for the EPF to capitalise on trading gains,” it said.

Meanwhile, the real estate and infrastructure asset class registered an increase in income to RM920 million in 1Q 2023.

Similarly, income from money market instruments rose to RM490 million, from RM280 million in 1Q 2022, in line with the return expectations set for these asset classes.

EPF said its overall investment assets as at March grew to RM1.04 trillion, of which overseas investments account for 37% of the total assets.

“EPF’s overseas investments, which were mainly in equities, continued to outperform and added value to the EPF’s overall return as they generated RM7.04 billion in income, representing 46% of the total investment income recorded,” it said.

The fund said domestic investments account for 63% of total assets, mainly invested in Held-To-Maturity Fixed Income instruments, and continued to provide long-term income stability through interests and profits.

Focus on resilient, fundamentally sound companies

EPF said it remained dedicated to supporting and contributing to the growth of the home economy by continuing to allocate more than 70% of its new investment annual allocation to the domestic market.

“A total of RM13.33 billion out of the RM15.16 billion investment income was generated for Simpanan Konvensional and RM1.83 billion for Simpanan Shariah,” it said.

EPF chief executive officer Amir Hamzah Azizan said while returns have been positive so far this year, financial markets have remained volatile, with geopolitical tensions and high inflation continuing to be key concerns for major markets worldwide.

In response to the situation, he said EPF had focused its equities portfolio strategy towards resilient and fundamentally sound companies with stable dividend payout.

Amir said it is essential for the EPF to consider the broader market dynamics to comprehensively improve its prospects of providing 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 will result in higher labour demand,” he said.

Amir said as Malaysia continued to increase its economic recovery efforts, EPF is seeing a steady uptick in the labour force participation rate, creating a solid foundation for sustaining consumer spending and economic development.

“The EPF’s membership data, which shows a continuing increase in the number of members and employers registering with the EPF, supports the notion that labour demand in the country has indeed improved,” he said.

As at March, EPF recorded new member registrations of 116,423, bringing the total number of EPF members to 15.79 million.

Out of that amount, a total of 8.45 million were active members, which now represent 50% of Malaysia’s 16.81 million labour force.

New employer registrations also showed strong growth of 24,281 during the period, bringing the total number of employers registered with EPF to 595,730.

Total contributions received increased from RM21.55 billion in 1Q 2022 to RM25.83 billion in 1Q 2023, the highest quarterly contributions to date, surpassing pre-pandemic figures. – Bernama, June 9, 2023.