Tuesday, June 18, 2013

Dividend May Be Lower This Year : EPF

KUALA LUMPUR (June 18, 2013): The Employees Provident Fund (EPF) has warned of the possibility of a lower dividend – the inflation rate plus 2% – this year, as it grapples with lower returns from government bonds which made up 55.2% of total investments in 2012.

Its CEO, Datuk Shahril Ridza Ridzuan, is, however, confident that it will be able to meet its inflation plus 2% dividend rate target "as long as inflation is under control".

The EPF announced a record dividend of 6.15%, or inflation plus 3.5%, for 2012, earlier this year. Returns from fixed income instruments exceeded 5.5% last year.

"We constantly need to reinvest money (in government bonds) that mature, and money that was previously invested (for the last 10 years) at higher rates of return (is being) reinvested for the next five to 10 years at much lower rates," Shahril told reporters after hosting newly-appointed Deputy Finance Minister Datuk Ahmad Maslan at its headquarters here yesterday.

"As an example, the Malaysian Government Securities (MGS) today for a 10-year paper, we are receiving (returns of) less than 4%, so you can imagine (what will happen) if we have too much of a concentration in fixed income ( investments)," he added.

The rest of EPF's funds are invested in equities (38.8%), money market instruments (3.6%) and real estate and infrastructure (2.4%).He said the pension fund is already seeing some of the impact of the lower returns in its numbers."As we continue to reinvest at lower rates of return for the same amount of risk that we are taking, we will see a lower rate of returns. So that's the biggest issue that we are grappling (with today)," Shahril said.

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