This article first appeared in The Edge Financial Daily, on May 13, 2016.

KUALA LUMPUR: The Employees Provident Fund (EPF) expects 1.5 to two million members to switch their contributions to its syariah-compliant fund in the first year after its inception in 2017.

EPF chief executive officer Datuk Shahril Ridza Ridzuan said the fund will have more stability due to its very low weightage in the more volatile financial sector.

In the long term, both the syariah and conventional funds should converge on the rate of returns, he said.

“Given the volatility in the financial sector over the last few years, what you will see is that the syariah assets will have slightly more stability in terms of income, whereas the conventional assets will fluctuate more depending on the performance of the financial sector,” he said at the Global Islamic Finance Forum 5.0. 

It was previously reported that the returns from the syariah-compliant fund will be based on portfolio performance as under syariah principles, a return cannot be guaranteed.

Despite this, Shahril said the EPF is committed to delivering sustainable long-term returns with a minimum 2.5% nominal dividend on an annual basis or 2% above the inflation rate over a period of three years. 

The EPF had 14.5 million members as at the end of 2015, and RM684 billion worth of assets under its management.

Shahril said about 40% of its assets are syariah-compliant, while the remaining 60% is not “not too far off” as the EPF adheres to the environmental, social and governance principles in its investment policies.