KUALA LUMPUR: The Employees Provident Fund's (EPF) dividends of 5.50 per cent for its conventional savings and 5.40 per cent for shariah savings are solid and reflect its excellent investment strategy, economists said.
The EPF announced the dividends for both Simpanan Konvensional and Simpanan Shariah today, involving a total payout of RM57.81 billion for 2023.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, who attended the announcement at EPF's head office in Kwasa Damansara here, said the fund's performance showed respectable trajectory despite overall volatility in the global market last year.
"Generally, the announced dividends are in a respectable trajectory. If we compare to the year prior, it is on the rising trend which reflects the performance of the external markets.
"In a nutshell, there is an increase in gross income of more than 20 per cent. Moreover, the announced dividends rates are more than the inflation rates," he told Business Times.
He said the EPF has about 38 per cent exposure in the overseas markets, meaning that the diversification strategy in EPF's investment portfolio has come into fruition.
"If we look at the movements of the global markets and EPF's investments in the domestic market, the latter market performance will also be impactful (towards its overall performance)," Afzanizam said.
Malaysian University of Science and Technology's professor of economics Dr Geoffrey Williams said the 5.50 per cent dividend particularly is robust and aligns with his anticipated range of 5.5-6.0 per cent.
He noted that the dividend surpasses last year's rate of 5.35 per cent, indicating an enhancement in performance despite facing challenges during the year.
"The dividend payout should be satisfactory for most members. It is higher than a fixed deposit and higher returns with lower risk than Amanah Saham Bumiputera at 5.25 per cent for example.
"The total EPF payout for 2023 is RM57.8 billion which is 13 per cent higher than 2022 at RM51.14 billion," he added.
It reflects an excellent investment strategy last year by the EPF team under the previous chief executive officer Datuk Seri Amir Hamzah Azizan who is now Finance Minister II, said Williams.
"The overall results of RM66.99 billion total investment income and RM57.8 billion payout is very strong and shows that a good portfolio management strategy involving domestic and overseas assets can continue to perform even in difficult circumstances.
"As at December 2023, the EPF's investment assets stood at RM1.14 trillion, of which 62 per cent was invested domestically and 38 per cent invested internationally.
"Domestic investments generated RM31.71 billion, or 47 per cent of total investment income, global assets generated income of RM35.28 billion, or 53 per cent, of the total investment income recorded," he added.
Williams said the main factors are a more stable environment for the EPF with no withdrawals, improvement in members and contributions which raised the investable funds and a good strategic asset allocation especially in overseas markets which pushed up the returns.
He noted that the domestic equity markets have had very low returns so the EPF strategy has been more active to get better returns in local equity markets.
"It is a very good performance and shows recovery from the last few years. The long-term strategy is sound and in addition to the payout allows EPF some retained funds for reinvesting.
"This year 2024 looks no more challenging than last year and possibly will be better. So we can expect a similar return this year so long as EPF is free to follow its best short-term and long-term strategy without outside interference," he said.
Williams observed that the robust financial outcomes also indicate that establishing a new Malaysian Superfund, equivalent in size by consolidating underperforming government-linked investment companies, could address the civil service pension issues and potentially offer a Universal Basic Pension for all individuals.
Such fund can help cover the civil service liability and offer a monthly pension of RM900 to 80 per cent of retirees who are not civil servants.
"A new Malaysian Superfund could even be run by the EPF portfolio managers. Then the returns will be as good as these," Williams added.