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EPF's overseas investment achieved 11.10% per year returns, outperforming domestic investments

PETALING JAYA: The Employees Provident Fund's (EPF) overseas investment has achieved 11.10% per year returns, outperforming domestic investments.
As of June 30, 2017, the EPF's overseas investments, or 29% of its total investment asset, contributed 32.5% to the total investment income in Q2 2017.
"Our foreign investments have proved to be a significant revenue driver in recent years, despite making up less than 30 per cent of total investment portfolio as at Q2 2017," said EPF chief executive officer Datuk Shahril Ridza Ridzuan (pic).
"The increase in global asset values mitigated the negative effect from the strengthening of the ringgit, providing opportunities for us to realise profit," he added.
"The outperformance was mainly driven by its overseas portfolios, which recorded a three-year annualised return on investment (ROI) of 11.10% as at June 2017, enhancing the value of EPF's return.
"While the domestic market remains integral to EPF's investments, we need to diversify our portfolio into broader markets with better investment opportunities and greater liquidity to enable the EPF to execute our strategies in line with our mandate. Doing so would equip the EPF with the agility and resilience to anticipate and rise above future market challenges," said Shahril.
Due to regulatory constraints, the EPF's exposure to overseas investment stood lower than the strategic asset allocation of 32%, specifically in real estate and infrastructure.
"These gaps could potentially result in lower than expected return for the EPF in the years to come.
"As at June 30, 2017, the EPF's exposure to real estate and infrastructure asset class remains at about 4% against its strategic asset allocation of 10%.
"In addition to being an inflation hedge, real estate and infrastructure has also delivered competitive return with lower risk compared to equities in the medium to long-term horizon.
"Despite recording significant annualised return on investment of 8.8% over the past three years, the contribution of income from real estate and infrastructure remains small as the exposure to the asset class is significantly lower than the targeted asset allocation," he said.
Commenting on the outlook for the second half of the year, Shahril said with the ringgit showing signs of improved stability, global investments would remain one of EPF's significant revenue drivers going forward.
"Domestically, while GDP growth continues to improve, the EPF will be vigilant of other external factors which may create uncertainty, including the possibility of global rate hikes, and rising geopolitical tensions," he said.
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