EPF to liquidate assets, need billions for gov’t initiatives

THE Employees Provident Fund (EPF) plans to sell some of its assets and rebalance its portfolio to make billions available to contributors in need of cash due to the economic downturn.

Online news portal, The Malaysian Reserve reported EPF CEO Tunku Alizakri Alias as saying that his team has estimated that the i-Lestari and i-Sinar programmes will see a withdrawal amounting to almost RM45 bil by year-end.

However, he did not offer specifics regarding the liquidation plan except that the fund would focus on assets that “best suit” its long-term strategy.

Yesterday, EPF announced that it would allow its contributors to withdraw money from their Account 1 under the i-SInar programme effective next month.

There are two sets of rule for the withdrawal; one is for those who have less than RM90,000 in Account 1 and the other is for those who have above RM90,000.

Both categories will only be allowed to withdraw a maximum of 10% of their Account 1 savings and the payments will be staggered over a period of six months.

The i-Sinar programme comes on top of the i-Lestari initiative where EPF contributors are allowed to withdraw RM500 monthly from their Account 2.

EPF has revealed that reductions in the contribution rate over the past eight months have seen it losing RM8 bil in opportunity cost, with another RM9 bil loss projected for next year, bringing the total impact on the pension fund to RM60 bil.

Elaborating further, EPF chief investment officer Rohaya Mohammad Yusof said the retirement fund has been planning to sell assets since March to ensure it had sufficient resources early in the pandemic.

“For now, it is just a matter of enhancing the strategy, meaning (we will look at) whether there is a need to rebalance our assets.

“As far as we are concerned, the strategic asset allocation will continue to be the prime drivers. We are also very cognisant about impacts on the market,” she was reported saying.

To date, EPF is the single largest investor in the local equity market.

On this year’s dividends, Alizakri declined to comment, reiterating the fund’s mandate to deliver at least a 2.5% annual yield and beat inflation by around 2% on a rolling three-year basis.

Last year, EPF declared a 5.45% dividend for conventional savings amounting RM41.68 bil and a 5% dividend for shariah savings totalling RM4.14 bil. The combined RM45.82 bil was down from RM47.3 bil declared in 2018 and RM48.13 bil in 2017.

It has been projected that EPF would need at least RM46 bil to keep dividends above 5% for this year. The annual payout will be announced in February or March.

“There is no such thing as a free lunch. For every amount of money that we make accessible to our members, it also means less money for us to invest.

“These are unprecedented times of high-quality assets with very low valuations. When more money is taken out and becomes unavailable, the trade-off is we will lose an opportunity,” Tunku Alizakri was quoted saying. – Nov 17, 2020


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