PETALING JAYA: The Employees Provident Fund (EPF) will have to liquidate its assets and rebalance its portfolio to make billions of ringgit available to contributors in need of funds to lessen the financial turmoil caused by the Covid-19 pandemic, a report said.
The Malaysian Reserve said EPF estimates that its i-Lestari and i-Sinar programmes will see almost RM45 billion withdrawn by the end of 2021, with eligible members having been given early access to their retirement savings.
It said reductions in the contribution rate over the past eight months have seen EPF losing RM8 billion in opportunity cost, with a RM9 billion loss projected for 2021, bringing the total impact on the pension fund to RM60 billion.
EPF CEO Tunku Alizakri Raja Muhammad Alias did not offer specifics regarding the liquidation plan, but said the fund would focus on assets that “best suit” its long-term strategy, the report said.
It quoted chief investment officer Rohaya Mohammad Yusof as saying the plan to sell off assets had been in place as early as March to ensure EPF had sufficient resources early in the pandemic.
“For now, it is just a matter of enhancing the strategy, meaning (we will look at) whether there is a need to rebalance our assets. As far as we are concerned, the strategic asset allocation will continue to be the prime drivers. We are also very cognisant about any impacts on the market,” Rohaya said.
The EPF is the single largest investor in the local equity market.
The report said Tunku Alizakri also declined to share specifics about the EPF’s dividends for 2020, reiterating the fund’s mandate to deliver at least a 2.5% annual yield and beat inflation by around 2% on a rolling three-year basis.
Last year, EPF declared a 5.45% dividend for conventional savings totalling RM41.68 billion and a 5% dividend for shariah savings totalling RM4.14 billion. The combined RM45.82 billion was down from RM47.3 billion declared for 2018 and RM48.13 billion in 2017.
It has been estimated that EPF would need at least RM46 billion to keep dividends above 5% for this year. The annual payout will be announced in February or March.
“I think people forget that there is no such thing as a free lunch. For every amount of money that we give access to our members, it also means less money for us to invest.
“These are unprecedented times of high-quality assets with very low valuations. When more money is taken out and becomes unavailable, the trade-off is we will lose an opportunity,” Tunku Alizakri was quoted as saying. – FMT