KUALA LUMPUR (June 13): The Employees Provident Fund (EPF) said on Thursday that it has no issue in increasing its domestic investment, despite the lower returns, compared to what it could get abroad.

The provident fund’s new investment annual allocation has increased to above 70% for domestic market, chief executive officer Ahmad Zulqarnain Onn said at a panel session here, during the second day of Bank Negara Malaysia’s Sasana Symposium 2024.

“In fact, we have no problem meeting 80:20, if you ask me,” Ahmad Zulqarnain said.

The remarks come following Prime Minister Datuk Seri Anwar Ibrahim’s call last year for the RM1 trillion pension fund to shift the domestic-foreign split of its investment portfolio to 70:30, from about 64:36 at the end of 2022.

The shift, however, sparked concern among its 16 million contributors that returns could be dragged by lackluster growth at home.

Ahmad Zulqarnain acknowledged that EPF’s investment portfolio has shifted towards international assets due to their higher returns, compared to domestic investments.

“International investments tend to be skewed towards higher-risk assets, such as equities and private equity,” Ahmad Zulqarnain said. In contrast, domestic investments are more focused on lower-risk assets, particularly fixed income, he noted.

The EPF is still reviewing its asset allocation strategy, “in that there will be a reallocation between lower risk assets to higher risk assets domestically, but in a very prudent manner,” Ahmad Zulqarnain said.

There are still untapped investment opportunities within Malaysia, including sectors like data centres and industrial logistics, which offer strong growth potential, he flagged.

“Certain segments like data centres (and) industrial logistics are actually very strong growth areas, and putting capital here will give you a decent amount of return,” he added.

On Wednesday (June 12), EPF announced that its overall investment assets as at March 2024 grew to RM1.19 trillion, of which overseas investments accounted for 38% of its total assets.

The EPF’s overseas investments, which were mainly in equities, continued to outperform and add value to the pension fund’s overall returns, as these generated RM9.88 billion in income, representing 51% of the total distributable income recorded.

The provident fund’s domestic investments account for 62% of total assets and are mainly invested in fixed income instruments.