This article first appeared in The Edge Financial Daily on February 13, 2018

KUALA LUMPUR: The Employees Provident Fund (EPF) expects the returns of its syariah account to match that of its conventional account in the long term, as both accounts share the same investment objectives and strategies.

Its chief executive officer Datuk Shahril Ridza Ridzuan said this yesterday when commenting on the variance in the two accounts’ returns for 2017. The fund had over the weekend announced a dividend rate of 6.9% for Simpanan Konvensional (with a total payout of RM44.15 billion) and 6.4% for Simpanan Shariah (with a total payout of RM3.98 billion).

That overall payout of RM48.13 billion represents an increase of 29.8% compared with 2016.

Shahril said there will be a deviation in the returns in the short term because the conventional account has access to global banking stocks, especially in the conventional space, as compared with the syariah account.

“For instance, in Malaysia we have a lot of big banks listed on Bursa Malaysia like Maybank, CIMB and RHB but we only have one listed Islamic bank which is Bank Islam and in future, we hope that MBSB also converts into an Islamic bank.

“Having said that, the scope for Simpanan Shariah’s exposure to banking and financial services is very much limited,” he said, adding that it is inappropriate to compare directly the two savings as they adopt two different concepts of returns.

The returns for Simpanan Konvensional were enhanced by the income generated from non-syariah investments following the outperformance of global banking stocks, while Simpanan Shariah does not include conventional banking stocks due to their non-syariah compliant status.

As at Dec 31, 2017, total EPF members’ savings amounted to RM768.51 billion, of which RM67.76 billion was under Simpanan Shariah and RM700.75 billion under Simpanan Konvensional.

“For Simpanan Shariah, we have about 700,000 contributors with a total size of RM68 billion, from RM100 billion allocated for the savings,” he said.

Shahril said syariah assets stood at 47.5% of the fund’s total asset exposure and contributed 42.9% of total income in 2017.

“Syariah investments’ underperformance is attributed to oil and gas and mobile telecommunications sectors,” he added.

In addition to declaring the highest dividend in two decades for 2017, the EPF also recorded its highest-ever gross investment income since its establishment in 1951. The RM53.14 billion income represented an increase of 14.13%, compared with RM46.56 billion recorded in 2016.

Of the RM53.14 billion amount, about RM4.6 billion was attributed to Simpanan Shariah, a reflection of its share of total syariah assets, while RM48.54 billion was attributed to Simpanan Konvensional.