Malaysia’s Employees Provident Fund, Kuala Lumpur, plans to increase its $1 billion global Islamic bond program by about 50% this year to meet government-set targets.
The fund, with more than 400 billion ringgit ($131 billion) in assets, will also start a $500 million program to invest in Asian bonds, Wan Kamaruzaman Wan Ahmad, general manager of treasury at EPF, said in an interview. The Asian debt program will aim to reap higher returns by investing in countries like Indonesia, which has a credit rating lower than investment grade, Mr. Wan said.
“The Asian fund will allow us to diversify,” he said. “We can invest in more countries and ultimately the main criteria is the protection of the principal investment.”
EPF, which currently doesn’t invest in junk-rated bonds, plans to double its allocation for overseas investment to 20% of holdings in three to five years, from 10%, to comply with a target set by Prime Minister Najib Razak in October, Mr. Wan said.
“We plan to increase the global sukuk (Islamic bond) fund by half a billion dollars this year and even by $1 billion if the market is conducive,” Mr. Wan said.
EPF started the global Islamic bond fund in 2010, with holdings that include dollar-denominated debt issued by the Malaysian government and Ras Al Khaimah, one of the seven sheikhdoms that make up the United Arab Emirates, Mr. Wan said. The pension fund started buying stocks in overseas markets in 2006, accounting for about 9% of total overseas investment, he said.
About 68% of EPF’s money is placed in fixed-income securities and properties, and the rest is in shares, Mr. Wan said.