KUALA LUMPUR: The Employees Provident Fund’s (EPF) investment income was up 20.33% at RM10.63 billion for the first quarter ended March (1Q15) from RM8.83 billion a year ago, largely due to returns from its equity investments.

Total investment assets stood at RM663.75 billion, arising from net contributions of RM5.9 billion and the reinvestment of investment income generated during the quarter.

In a statement yesterday, EPF chief executive officer Datuk Shahril Ridza Ridzuan said the retirement fund’s improved performance was due to its equity investments.

“This was supported by economic developments, including the stabilisation of oil prices and positive progress in the eurozone, leading to a number of global markets registering encouraging growth,” he said.

He added that the strengthening of the US dollar had boosted returns from the EPF’s global investments, which contributed to 44% of its total income.

As at March 31, the EPF’s global investments made up 25% of its total investment assets.

“Under the current low-interest rate environment, the EPF has further diversified its investments in equities, real estate and infrastructure to ensure the preservation of its members’ savings and to generate the desired real rate of return,” said the fund.

For 1Q15, equities accounted for 43% of its total investment assets and contributed RM6.36 billion or 60% of its total income, up 31% from RM4.84 billion for 1Q14, mainly due to the higher income recognised in the EPF’s global portfolio, which capitalised on a price rally in both emerging and developed markets during the quarter.

The asset size of its real estate and infrastructure investments expanded 43% to RM20.93 billion, which brought in an income of RM251.54 million for the quarter.

“The asset class is expected to receive more dividend income for the coming quarters, and to recognise the gains from recent property disposals,” said the EPF.

A major portion of its investments are now in fixed-income instruments, which accounted for 50% of its total investment assets for 1Q15.

EPF said fixed-income investments continued to provide a steady stream of income amid the low-interest environment, and that it is presently taking opportunities “to capitalise on yield movements to rebalance the portfolio’s yields”, as rates are expected to remain at historical lows in the near term.

Meanwhile, its investment into Malaysian government securities generated RM1.7 billion in income for 1Q15, up 7% from RM1.58 billion a year ago.

Loans and bonds, on the other hand, contributed an income of RM2.03 billion, compared with RM2 billion for 1Q14, while money market instruments contributed RM278.20 million in income.

The fund also revealed it had invested more than 40% of its funds in syariah-compliant assets, in anticipation of the launch of a fully syariah-compliant fund in the future.

On the overall market outlook, Shahril said: “Global growth remains moderate with uneven prospects across countries and regions, particularly contrasting outlooks for emerging and developed markets.”

He also said it is widely anticipated that there is a higher risk now of US interest rates normalising, and this will spur demand for the US dollar, which will impact global currencies and capital markets.

“While we managed to achieve a good start for the year, we remain cautious for the quarters to come due to uncertainties of both economic and investment environments on the global and domestic fronts.

“As a retirement fund, [the] EPF continues to focus on its long-term strategies to meet its targets for an inflation-adjusted return,” Shahril added.

This article first appeared in The Edge Financial Daily, on May 22, 2015.