KUALA LUMPUR: The Employees Provident Fund (EPF) recorded total investment income of RM15.85 billion for the first quarter ended March 31, 2022 (Q1 2022), lower than the RM19.29 billion recorded in the corresponding quarter in 2021, dragged by a significant decline in worldwide markets.
EPF chief executive officer Datuk Seri Amir Hamzah Azizan said the fund had a strong start in the earliest part of the first quarter, but the situation took a turn as global markets suffered a decline, causing lower returns in bonds and equities throughout the remaining quarter.
"The decline was attributed to a number of developments stemming from geopolitical tensions, impact of soaring inflation rates and interest rate hikes.
"The Russia-Ukraine war only exacerbated the situation, causing further uncertainty and volatility at a time when countries are still struggling to recover from high debt burdens and stretched public finances from the pandemic,” he said in a statement today.
Although earnings generation from equities, which continued to be EPF’s main income contributor, was impacted by the market slowdown, Amir Hamzah said the EPF managed to leverage on its portfolio position to capitalise on additional gains.
During the quarter under review, equities contributed RM10.46 billion in income, accounting for 66 per cent of total gross investment income.
"After taking into account the cost write-down on listed equities, net investment income for the asset class generated RM9.37 billion for the period,” he added.
A total of RM1.09 billion was written down for listed equities during the quarter, thus netting the total net investment income in Q1 2022 to RM14.76 billion.
Writing down is an internal policy adopted by the EPF on its Listed Equity investment as a prudent measure to ensure the portfolios remain healthy.
Fixed income instruments, comprising Malaysian government securities and equivalent, as well as loans and bonds, contributed a steady income of RM4.75 billion or 30 per cent to the gross investment income.
"The income recorded was higher compared to RM3.89 billion generated in Q1 2021, largely due to higher market yield in Q1 2022, compared to the same period last year.
Real Estate and Infrastructure registered a decrease in income to RM0.36 billion, from RM0.71 billion in the corresponding period in 2021, whereas income from money market instruments stood at RM0.28 billion, from RM0.38 billion in Q1 2021.
As of March 2022, the EPF’s overall investment asset grew to RM1.02 trillion, of which 37 per cent was invested in overseas investments.
The EPF’s diversification into different asset classes, markets and currencies continue to provide income stability and add value to EPF’s overall return.
In Q1 2022, the EPF’s overseas investments generated RM8.23 billion in income, representing 52 per cent of the total gross investment income recorded.