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.
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"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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