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KUALA LUMPUR (September 19): The Employees Provident Fund (EPF) reported a gross investment income of RM15.12 billion for the second quarter ended June 30, 2020 (2Q20), a 24.3% increase than the RM12.16 billion it reported for 1Q20, as equities showed an upward trend towards the end of 2Q20, when both the FBM KLCI and global markets began to improve as economies gradually reopened.
Net investment income was RM13.46 billion in the quarter, an increase of 79.5% from RM7.5 billion in 1Q20.
In a statement, EPF Chief Executive Officer (CEO) Tunku Alizakri Alias said that the extremely volatile and challenging conditions observed since early 2020 showed no signs of normalization as ongoing issues such as trade tensions between the United States and the China and low oil prices remained unresolved. while Covid-19 continued to wreak havoc in unprepared countries around the world.
However, he said, the fund’s Strategic Asset Allocation (SAA) framework that guides him in how he structures his investments and his portfolio served him well during the tumultuous first half of the year.
“For example, our exposure to fixed income instruments allowed us to overcome the initial drop at the beginning of the quarter. We then saw a bullish move in equities towards the end of the quarter, when both the FBM KLCI and global markets began to improve. that economies gradually but cautiously reopened. Moving forward, we remain cautious as a second wave of Covid-19 remains a possibility, which would have a significant negative multiplier impact on the already weak economic conditions faced by many countries that have not yet come out of the first wave, ”he said.
Stocks contributed 54% or RM8.11 billion of the retirement fund’s gross investment income for 2Q20, while fixed income instruments contributed RM6.17 billion, real estate and infrastructure contributed 470 million ringgit and money market instruments provided the remaining 370 million.
By contrast, equities contributed 52% or RM6.32 billion of its gross investment income for 1Q20, while fixed income instruments contributed 40% or RM4.87 billion. Its investments in real estate and infrastructure contributed RM540 million, while money market instruments contributed another RM430 million.
The retirement fund’s investment assets amounted to RM929.64 billion at the end of June, of which 30% was invested abroad.
“As of the second quarter of the year, 39% of total reported gross investment income was contributed by EPF’s overseas investments. Overseas income was driven by a recovery in equity markets in the second quarter, allowing the EPF to continue the recession during the first quarter of the year. Fixed income also contributed to higher earnings due to an underperforming environment, which provided more opportunities for the fund to realize its earnings. “the EPF said in the statement.
On the outlook for the second half of 2020, Tunku Alizakri said the EPF remains cautious, even as more countries are easing their quarantine restrictions and markets reopen their businesses, as a Covid-19 vaccine remains a promise. that would not be fulfilled in the immediate future. .
“We already have Australia’s state of Victoria going back into lockdown in early July and New Zealand and Hong Kong reviewing their control measures.”
“In light of the unprecedented situation, we believe that we achieved a satisfactory performance, balancing the urgent liquidity needs of our members with the long-term responsibility of ensuring financial adequacy at retirement and sustainable returns on investment. Going forward, it will be even more crucial for the EPF to continue investing in fundamentally strong assets, especially those companies that have demonstrated a pivotal ability to adapt to the new standard, ”he said.
In that regard, he said, the EPF is committed to accelerating its adoption of environmental, social and governance (ESG) criteria as a central part of its investment decision-making process, as it believes that sound ESG practices will enable economies, industries and companies Be more adaptable and resilient in times of crisis.
Read also:
EPF registers gross investment income of RM12.16b for 1Q20
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