THE Employees Provident Fund (EPF) is exploring opportunities to invest more directly in natural resources assets, instead of just being a shareholder.
Malaysia’s largest pension fund is particularly interested in owning plantation assets as part of an overall strategy to improve its investment portfolio.
Chief executive officer Datuk Shahril Ridza Ridzuan said EPF had been gradually diversifying away from pure fixed income and private equity investments in the last few years when it expanded its real estate and infrastructure portfolio.
In the natural resources area, Shahril said EPF was already one of the largest investors in palm oil companies.
However, it has no direct exposure in terms of owning a plantation asset yet.
“We’re looking at taking more direct exposure, not just through the listed space but by directly owning or controlling some of
the planted assets,” he said at EPF’s 2016 annual report briefing, here, yesterday.
The pension fund is also monitoring the trend of its global counterparts, which are investing more in renewable forest and farm land assets.
“It is the direction that some of the global pension funds are moving into. The whole idea is to build up the whole portfolio of very long-term assets which can provide not just steady cash flow, but also some inflation hedging,” said Shahril.
Last year, EPF recorded a 2.68 per cent increase in annual contribution to RM61.59 billion against total annual withdrawals of RM46.8 billion, resulting in net inflows of RM14.79 billion.
The annual report, which was tabled in Parliament on April 5, showed a 6.81 per cent increase in total investment assets to RM731.11 billion from RM684.53 billion in 2015.
EPF ended last year with RM46.56 billion in total gross investment with a gross income return on investment of 7.12 per cent. This was 36 basis points lower than the 7.48 per cent in 2015 and attributed to slow global growth and weak corporate earnings.
The total dividend credited into members’ accounts was RM37.08 billion.
The payout amount required for every one per cent dividend rate for the year was RM6.51 billion, an increase of 8.86 per cent from RM5.98 billion in 2015.
Shahril said the slump in crude oil prices, weaker ringgit and corporate earnings, as well as large-scale withdrawals of capital from emerging-market economies into developed countries had also impacted the fund.
EPF has announced a dividend of 5.7 per cent for last year versus 6.4 per cent in 2015.