The Employees Provident Fund (EPF) delivered a solid performance for 2020 in terms of both its operational and financial results, declaring a dividend of 5.20 percent with a payout amounting to RM42.88 billion for Simpanan Konvensional; and 4.90 percent for Simpanan Shariah, with a payout amounting RM4.76 billion. Cumulatively, the total payout for 2020 amounts to RM47.64 billion.
With an average five-year real dividend of 4.62 percent for Simpanan Konvensional and 4.32 percent for Simpanan Shariah after adjusting for inflation, the EPF has exceeded its strategic target of declaring at least 2.00% real dividend on average for a rolling five-year basis.
The EPF has been successful in posting a strong performance in 2020 despite the once-in-a-lifetime event stemming from the Covid-19 pandemic and the unique circumstances the world found itself in, with the twin health and economic crises.
EPF Chairman Ahmad Badri Mohd Zahir said, “We managed to safeguard our members’ retirement savings well, while meeting their immediate needs to deal with the current challenges. It was not easy at times as we had to walk a tightrope in ensuring that our members survive the difficult times while balancing their future needs.”
“The quick spread of Covid-19 and its transmissibility made it a Black Swan event that many found challenging to manage. However, we were proactive in managing the pandemic and that helped us to ride through the challenges. Our focus on digitalisation enabled us to assist our members more efficiently and seamlessly while ensuring that we remain relevant to members who are more technology-savvy.”
“The EPF’s speed of adaptability in its investment strategy and processes ensured that we were able to deliver optimum performance, and we further leveraged on the strength of our approximately 250-strong investment professionals who diligently managed the portfolios and took proactive measures. Solid teamwork and digital infrastructure ensured that we could adapt seamlessly to the new work norms,” Ahmad Badri added.
The EPF also rebalanced its investment portfolios based on thorough consideration on how the Covid-19 pandemic and global uncertainties such as the US Presidential election in November 2020, the continuous US-China trade dispute, and the impact of the Brexit negotiations had influenced capital markets worldwide.
Following lower net contributions during the year, the EPF’s ability to adapt to the current times ensured its investments were able to deliver long term sustainable returns under the new normal. The fund recorded its highest ever gross investment income of RM60.98 billion, with RM6.15 billion allocated to Simpanan Shariah.
The strong performance was due to the prudent approach guided by the Fund’s overall Strategic Asset Allocation (SAA), which has kept the EPF resilient despite the unanticipated crisis. By asset class, Fixed Income instruments made up 46 percent of investments, while Equities comprised 42 percent. Real Estate and Infrastructure as well as Money Market instruments made up 5 percent and 7 percent, respectively.
As at December 2020, overall the EPF had 33 percent of its investment assets outside of Malaysia across all asset classes. Equities, particularly foreign equities, continued to be the driver of returns with a total income of RM28.71 billion. The private equity portfolio also demonstrated strong performance with a consistent income distribution.
While leading stock indices lost as much as 40 percent in the first quarter, the EPF took the opportunity to rebalance its portfolio by acquiring shares that were fundamentally strong at attractive prices. The recovery in the second half of the year on the back of improved global and domestic markets also contributed significantly to the EPF’s investment portfolios, providing for profit-taking opportunities, particularly in the fourth quarter.
The EPF took prudent measures to write down RM7.71 billion of its listed equity portfolio, to ensure that the Fund’s long-term investment portfolios remain healthy.
During the year, the EPF introduced several withdrawals namely the i-Lestari and i-Sinar facilities, which required a robust liquidity plan. Hence, the Money Market portfolio grew significantly to cater for all the withdrawals. The income from the Money Market portfolio came in at RM1.19 billion.
With almost half of the Fund’s total asset allocation in Fixed Income instruments, comprising Malaysian Government Securities & Equivalent and Loans & Bonds, the EPF was able to maintain stable returns and at the same time captured opportunities to realise profit as interest rates declined. Income from the portfolio came in at RM25.42 billion, or 42 percent of the Fund’s total gross income.
The Real Estate and Infrastructure portfolio’s income of RM5.66 billion came with its own set of challenges, with lockdown measures and work-from-home resulting in lower income from certain segments of the real estate sector. However, the portfolio overall continued to play a role as a hedge against inflation with a spread of about 50 basis points above Fixed Income instruments.
The EPF’s overall investment assets grew 7.9 percent to RM998 billion, with the market value hitting RM1.02 trillion at the end of last year. The Fund’s membership base grew by 2 percent to 14.89 million, while employers registered with the EPF stood at 534,398. It takes RM8.25 billion to pay out every 1 percent dividend for Simpanan Konvensional and RM972 million for every 1% dividend for Simpanan Shariah in 2020.
