The move could bring about RM60bil into the local capital market as the provident fund downsizes its foreign asset allocation to the 30% level from about 36% of its RM1 trillion in assets under management.
“The inflows will also strengthen the ringgit and may lead to changes in local corporate dividend policy to undertake higher payout to the EPF in exchange for the opportunity cost of lowering its allocation abroad,” he said.Prime Minister and Finance Minister Datuk Seri Anwer Ibrahim had called on the fund to make necessary and strategic investments for the nation and help in the upskill of the young.
Apart from the EPF he also named sovereign wealth fund Khazanah Nasional Bhd to do the same. The concern, however, for the 15.7 million members would be on how such a move would impact the risk profile and returns the fund would make in the future. The flattish returns domestically and prospect of higher returns abroad as well as the need to lower concentration risk, has led other government-linked investment companies like Permodalan Nasional Bhd, Khazanah and Retirement Fund or KWAP to join EPF in investing abroad.
“These are fairly liquid but still below 5%. Corporate bonds of a few property developers are yielding 6% to 7% but deemed lower quality. “There are a few attractive candidates for privatisation as their value is not appreciated by fund managers who mainly focus on well promoted stocks,’ he said.