Malaysia’s Employees Provident Fund to hike overseas investments

Malaysia’s Employees Provident Fund, Kuala Lumpur, plans to raise holdings of overseas investments to 30% by 2017 to boost returns.

The retirement fund, with 470 billion ringgit ($155 billion) in assets, is currently allowed to invest in foreign holdings as much as 23% of its portfolio, said CEO Azlan Zainol, who manages the fund. EPF’s investments abroad now account for 13% and will need to be increased, upon government approval, as the retirement fund would have at least 600 billion ringgit to 700 billion ringgit in five to six years, Mr. Azlan said.

“We will continue to focus on areas that will give stable returns for this year and the next few years to come,” Mr. Azlan said in an interview in Kuala Lumpur on Monday. “These asset allocations that we’ve been working on have done us well and have contributed to our income reasonably well and have mitigated all kinds of risks that we are facing.”

EPF posted 27.2 billion ringgit of gross income from investments last year, 13% more than it earned in 2010, helped mainly by realized gains in domestic and global equities, according to data published on its website.

The retirement fund will start buying global bonds in the second quarter to rebalance its overseas portfolio to be in line with domestic investments, Mr. Azlan said. Stocks account for about 80% of the overseas investments compared with 35% in the domestic market, he said.

The majority of EPF’s assets are currently invested onshore, primarily in government bonds. The yield on the nation’s benchmark 10-year debt is about 1.5 percentage points above similarly dated Treasuries.

“Technically, we can go up to 42% in equities but we don’t want to,” Mr. Azlan said. “We will try and keep it within 35% — even at 35%, I feel you’re walking at the edge.”

The retirement fund’s overseas investment focus will be on Southeast Asia with “the strongest growth in Indonesia over the long term,” Mr. Azlan said. EPF also has investments in the U.K., U.S., Japan and Australian stock markets, while it will invest in China through Hong Kong, he said. The retirement fund has no plans to apply for an investment manager license in China, he said.