By AYISY YUSOF
KUALA LUMPUR: EPF has already invested heavily in Malaysia and the pension fund manager should have a balanced returns and assets allocation to generate returns for the dividend, say analysts.
MIDF Research deputy head Mohd Redza Abdul Rahman said to find better returns, EPF would sometimes need to look beyond Malaysia.
“Increasingly, pension funds have been looking beyond the traditional fixed income and stocks asset classes,” he told NST Business today.
Mohd Redza opined that so many fund managers have ventured into private equity investments including infrastructure and property development projects.
“Generally, fund managers have to look outside to find better returns at the level of risk profile allowed by their mandate,” he said, while adding that EPF would not jeopardize the trust held by members.
Mohd Redza concurred that EPF has done extensive analysis on potential investments before they decide to invest.
“For example, investments in office buildings that generate good rental yields that is higher than the dividend payment commitment would be something that is worth considering,” he added.
Mohd Redza said infrastructure projects such as (toll roads and power generation assets) would be another avenue to diversify investments into other asset classes, especially when it comes with attractive cash flow projections and acceptable risk profile.
Although, some other asset classes maybe a risky, but with a good asset allocation model, he believed that EPF would be able to balance between the risk and returns.
“If the investment can give higher return, then it is prudent for EPF to make investment to generate higher return for the members.
“Sometimes there are opportunities available outside of Malaysia, which can generate higher return at par or below the risk profile compared to investments that we have in this region,” he said.
Mohd Redza stressed that EPF needs to find ways to manage the various opportunities they have on the table to ensure it can meet the return obligation and asset allocation model that is given by the mandate.
“Private equity investment is one that investors invest not only on start up but also in infrastructure project, which is better as it is backed by asset and have controlling stake in the project,” he said.
Mohd Redza said private equity investment is part of the risk profile that EPF needs to be comfortable with, which in turn can generate better return than it has in other asset classes.
Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the US economy has been growing at a healthy clip while equity prices have been recording multiple highs during the year.
“There is an investment case for EPF to consider from a macroeconomic standpoint. We also understand that infrastructure spending is one of the important growth agenda in the US given their state of infrastructures are rather old and in dire needs for reinvestment,” he said.
Mohd Afzanizam noted there is an opportunity to invest in the infrastructure space, as an institutional investor, EPF has to constantly diversify its portfolio in order to reduce their overall portfolio risks and that include diversification in terms of geographical location.
“The Strategic Asset Allocation (SAA) will be their guiding principle as specific target for each asset class will correspond to the level of risk. Therefore, it is going to be a calculated risk the way we see it,” he said.