Muhammed Abdul Khalid and Jeffrey Williams said most members should be satisfied with the 2023 dividend increase as it is better than FD interest rates and ASB stock returns.
PETALING JAYA: Economists say the dividend increase announced by EPF is commendable considering that its investments faced tough conditions last year, especially in the domestic market.
Mohammad Abdul Khalid and Geoffrey Williams said dividend payments were higher than Amanah Saham’s fixed deposit interest rates and stock returns and should be satisfactory to most members.
Today, EPF announced a dividend of 5.5% on conventional savings and 5.4% on Shariah accounts, both higher than last year. In 2022, they spent 5.35% on traditional savings and 4.75% on Sharia accounts. The total distribution to EPF members was RM57.8 billion, an increase of 13% compared to RM51.14 billion in 2022.
Muhammed said the dividend increase in 2023 was a result of EPF’s strong performance in investing in developed markets, adding that this was possible because the fund was managed by a competent team.
“The developed market index ended last year up 21.6%. Our local market ended the year down a sharp -2.7% and has yet to recover to pre-COVID-19 levels.
“Therefore, the dividend increase is not surprising given EPF’s global reach.” “The returns were higher compared to companies that invested heavily only in the Malaysian market,” he told FMT.
EPF CEO Ahmad Zulkarnain Ong said the rate hike was possible due to the strong performance of overseas investments, which account for 38% of total assets.
Muhammed said it is noteworthy that EPF does not pay dividends from unrealized gains, meaning that appreciation in the value of private market assets does not contribute to the dividend.
“EPF also has a no-reserve policy, which means the dividends declared will be determined solely based on the current year’s market performance.”
“Despite the continued depreciation of the ringgit, returns are limited as EPF hedges its investments in bonds and equities. Therefore, all foreign exchange gains from the realization of foreign investments were offset by hedging activities,” he said.
He said the key issue for the EPF was social protection rather than investment, given Malaysians’ generally low retirement savings.
good investment strategy
Williams said EPF’s performance reflects the good investment strategy the team undertook last year under former CEO Amir Hamza Azizan, who is now second finance minister.
“Overall performance and distribution were very strong, demonstrating that a good portfolio management strategy leveraging domestic and international assets can continue to be successful even under difficult circumstances.”
“The key factors are a more stable environment for the EPF with no withdrawals, improved membership and contributions with investable funds, and better strategic asset allocation, especially in overseas markets,” he told FMT. , which boosted revenue.” Mr Williams said the “sad side” was that EPF’s recent withdrawal policy had depleted accounts and left millions of people without benefits.
He said that EPF strategies are becoming more aggressive to achieve better returns in the domestic market as returns in the domestic stock market are very low, adding that it has shown recovery in the past few years.
“This year may be less difficult and even better compared to last year. Therefore, as long as the EPF is free to pursue its best short- and long-term strategies without outside interference, we will see similar gains this year.” You can look forward to it.”
He also said the strong financial results meant that the proceeds could solve the public sector’s pension problem, and that the underperforming GLIC could be merged with a separate new Malaysian super fund of similar size that everyone would benefit from. He said this shows that it is possible to provide a universal basic pension.
“If we can achieve the RM57.8 billion EPF disbursement from Malaysia’s super fund this year, it will be enough to remove the entire burden on civil servants and provide a monthly pension of RM900 to 80% of private sector pensioners. .” “The fund could also be managed by an EPF portfolio manager who can ensure comparable returns,” he said.
