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Malaysia’s EPF announces 5.7% dividend; portfolio ends 2016 at 731 billion ringgit

Malaysia's Employees Provident Fund, the national defined contribution backbone of the country's retirement savings system, will credit participants with a 5.7% dividend payout for 2016, the EPF announced Saturday.

The dividend – among the country's most closely-watched financial announcements - was down from 6.45% the year before, and the lowest figure since the 5.65% payout for 2009.

Even so, Samsudin Osman, the fund's chairman, noted in an EPF news release that the inflation-adjusted payout of 3.61% handily cleared the fund's real dividend target of 2.5% in a year of market volatility driven by political surprises such as Brexit and the U.S. presidential election.

The EPF's investment portfolio closed the year valued at 731.1 billion ringgit, up 6.8% from the year before – with efforts in recent years to add exposure to overseas assets supporting the fund's results for a second year in a row.

As of the end of 2016, overseas investments grew to 29% of the overall portfolio, up from 25% the year before and above the fund's medium-term target of 27%. That rise, in part, reflected a third year in a row of declines for Malaysia's stock market, with the country's benchmark stock index slipping 3% in 2016, as well as a gain of roughly 4% for the U.S. dollar against the ringgit.

The news release said the EPF enjoyed a record 46.56 billion ringgit in gross investment income for the latest year, up 5.3% from the year before. Gains and income from the fund's overseas holdings accounted for 39% of the total, the EPF news release said.

The fund's equity allocations contributed 57.7% of total gross investment income for 2016, followed by Malaysian government securities, loans and bonds, with 34.9%; real estate and infrastructure, at 5.3% and money market holdings, at 2.1%.

At the end of 2016, the fund was allocating 48.58% of its assets to fixed income instruments; 42.33% to equities; 5.06% to money market instruments and 4.03% to real estate and infrastructure.

With market volatility poised to make the coming year a challenging one, Mr. Samsudin said the EPF will continue to pursue diversification, with a focus on boosting allocations to real estate and infrastructure.

In an update the EPF said as of Dec. 23, 2016, 635,037 EPF members had switched 59.03 billion ringgit in EPF savings to the shariah-compliant sleeve of the fund established last year, roughly two-thirds of the initial 100 billion ringgit allocation set aside.