KUALA LUMPUR (March 4): The Employees Provident Fund (EPF), the country's largest pension fund, reported a 19.7% decline in its total gross investment income to RM55.33 billion for 2022, compared with RM68.89 billion in 2021, dragged lower by weaker performance across all its asset classes.
Of the total gross income, the equities asset class contributed RM30.54 billion, or 55%, which was 25.6% lower than the RM41.06 billion recorded in 2021. Foreign listed equities, which yielded a return on investment of 9.27%, continued to be the driver of returns for this asset class.
Income from its fixed income portfolio, meanwhile, contributed RM18.19 billion or 33% of the EPF's total gross income for 2022. This was an 11.3% year-on-year (y-o-y) decline from RM20.53 billion recorded in 2021, due to lower capital gains driven by increasing yields.
The real estate and infrastructure portfolio’s income came in at RM5.56 billion last year, down 12.6% y-o-y from RM6.36 billion in 2021.
The remaining income was derived from money market instruments, which stood at RM1.04 billion. However, this was a 10.6% decline from RM940 million in 2021.
Speaking at a media briefing to announce the fund's 2022 financial performance on Saturday (March 4), EPF chief executive officer Datuk Seri Amir Hamzah Azizan said the decline in total gross investment income for 2022 was in tandem with trends observed among global funds due to the challenging environment, including slower global growth and high inflation rates. This was compounded by the tightening of monetary policies by major central banks to reel in inflationary pressure.
He said the challenging environment was also against the backdrop of geopolitical instability, with Russia's invasion of Ukraine causing a major dislocation in commodity prices, compounded by tensions between the US and China.
"The year also saw major global equity benchmark indices wrapping up their worst annual performance since 2008, falling between 20% and over 30% during the year. On the domestic front, the FBM KLCI closed the year 5% lower y-o-y at around the 1,495-point level. The bearish market performance weighed on the EPF’s earnings generation from equities, which continued to be the EPF’s main income contributor," Amir Hamzah added.
EPF chairman Tan Sri Ahmad Badri Mohd Zahir said the fund anticipates that the 2023 investment climate will continue to be challenging in the short and medium term.
"The continuing uncertainty underscores the need for a thoughtful approach that focuses on building resilience, while aligning with the EPF’s long-term investment objectives in accordance with our strategic asset allocation.
"We are currently working on enhancing the current business model by fully separating Simpanan Shariah assets from investing alongside shariah-compliant assets in Simpanan Konvensional. By separating, they would have their own independent strategy and differentiated strategic asset allocation, which would ensure more optimised, competitive, and sustainable long-term returns for both Simpanan Shariah and Simpanan Konvensional. We target to roll this out in 2024, as mentioned in the recent Budget 2023 announcement,” added Ahmad Badri.
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