KUALA LUMPUR: Lembaga Tabung Haji's tolerance for moderate investment risk is in line with the primary mandate of its establishment to manage the Hajj pilgrimage efficiently and not just manage investments to generate returns.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the Islamic financial institution distributes profits or dividends to depositors after zakat, and this is unique compared with other investment institutions in Malaysia.

Hence, he said Tabung Haji's profit distribution rate that meets shariah requirements is slightly different when compared to other investment institutions, such as the Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB), due to the level of risk tolerance set.

Previously, Tabung Haji recorded a profit distribution after zakat of 1.25 per cent in the 2018 financial year, 3.05 per cent in the 2019 financial year and 3.10 per cent in the 2020 and 2021 financial years.

He expects Tabung Haji's profit distribution for the 2023 financial year to be sustainable or higher but not far off from the 2022 profit distribution, which is 3.10 per cent.

Mohd Afzanizam said that based on the strategic asset allocation for Tabung Haji, fixed income investments represent the largest chunk at 60 per cent, followed by equity (22 per cent), real estate (nine per cent), money market (eight per cent) and others (one per cent).

"Given that the rate of return for the Malaysian government sukuk or Government Investment Issues (GII) has decreased on average compared to the previous year, this gives a positive growth in capital value and a good investment for Tabung Haji," he said.

He said the uncertainty of the global economic situation, as well as geopolitical factors, would affect the capital market performance in which Tabung Haji invested.

"Risk tolerance for Tabung Haji is indeed moderate. Therefore, the investment approach in fixed income instruments is seen as the right measure to ensure depositors' savings is not compromised as a result of high investment risk," he told Bernama.

He also said the highly experienced and professional management team of Tabung Haji will definitely work to ensure the institution's investments grow in line with its level of risk tolerance.

He said as an institution entrusted to help Muslims to complete the fifth pillar of Islam, Tabung Haji has shown a high level of professionalism and a good track record. This is reflected in the constant praise by the Saudi Arabian government for the commendable discipline shown by Malaysian pilgrims.

Meanwhile, Putra Business School economic analyst associate professor Dr Ahmed Razman Abdul Latiff said that despite the challenging environment and its low-risk investment strategy, the institution is able to remain sustainable and provide reasonable returns to depositors.

"I see the possibility that Tabung Haji's profit distribution this time will be in between 3.1 to 3.2 per cent," he said, adding that the institution could venture into shariah-compliant investments abroad that are able to potentially bring higher returns.

He is optimistic that Tabung Haji would still be the preferred shariah-compliant institution by depositors, considering its primary role in helping depositors to perform the Hajj, apart from the bonus of obtaining dividends.

Universiti Tun Abdul Razak economist professor Dr Barjoyai Bardai expects the dividend for the financial year 2023 to be around 2.0 per cent to 3.0 per cent, which is still a good performance considering that depositors receive a net distribution after setting aside zakat.

"However, inevitably, investors will compare the performance between the three main investment institutions which are Tabung Haji, EPF and PNB and they should compete with each other to show good investment management performance and that becomes a baseline (for investors)," he said.