sideviews
EPF must make prudent business decisions to maximise returns – Sin Chew Daily
The Employees Provident Fund (EPF) has announced a dividend rate of 6.4% for 2015.
Although the rate is a shade below the 6.75% for 2014, the move is commendable given the generally uninspiring economic showing in the world.
Prime Minister Datuk Seri Najib Razak subsequently expressed his satisfaction with EPF's dividend rate.
Indeed, EPF members would hope for higher dividend rate to further strengthen their old-age savings, but under the constraint of objective economic conditions, we simply cannot expect unrealistically high dividends.
EPF's investment returns for last year stood at RM44.23 billion, 13% better than the RM39.08 billion registered a year earlier.
Even though the poor performance of the local bourse has eroded the earnings of EPF, which boasts a total asset value of RM120 billion, luckily its oversea ventures have paid off, further boosted by the forex earnings from a weakened local currency.
In 2016, the local prospect does not seem to look anything more promising while global markets remain sluggish.
It is therefore foreseeable that EPF's investment performance during the first quarter of this year to pale by comparison.
EPF finds itself in a highly challenging investment environment, and the agency's priority now is to expand the value of its members' savings in the midst of uncertainties.
Owing to the lacklustre economic environment in the country, the investment scope is expected to shrink, and it will not be easy for EPF to find the right investment opportunities for its enormous fund.
One solution is to look beyond our shores. Currently EPF invests about 25% of its fund overseas and has plans to increase this percentage to 27% within the next two years.
That said, there are risks associated with oversea investments given the gloomy global outlook stemming from the slack recovery in the US and a slowing Chinese economy, posing additional risks.
EPF must adopt a more prudent and diversified investment strategy to bring the risks to a minimum.
EPF has in the past been involved in some rather controversial business decisions such as injection of fund into ValueCap.
It is hoped that EPF would pick up some lessons from its own past missteps.
EPF has on its shoulders an irrevocable obligation to grow the old-age savings of its more than 10 million members. Every single decision must be made with the members' interests in mind.
2016 is going to be a very challenging year without the slightest doubt, and EPF must be additionally cautious in risk assessment and investment management in a bid to churn out reasonable returns for its members. – Mysinchew.com, February 23, 2016.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
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