The Employees Provident Fund (EPF) recorded a 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 CEO Amir Hamzah 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 remainder of the quarter.
“The decline was attributed to a number of developments stemming from geopolitical tensions, the 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 said the EPF had managed to leverage its portfolio position to capitalise on additional gains.
During the quarter under review, equities contributed RM10.46 billion in income, accounting for 66% 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, bringing the total net investment income in Q1 2022 to RM14.76 billion.
Writing down is an internal policy adopted by the EPF on its eisted Equity investment as a measure to ensure that the portfolios remain healthy.
Fixed income instruments, comprising government securities and the equivalent, as well as loans and bonds, contributed a steady income of RM4.75 billion or 30% to the gross investment income.
The income recorded was higher than the RM3.89 billion generated in Q1 2021, largely due to the 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 assets had grown to RM1.02 trillion, of which 37% was invested in overseas investments.
In Q1 2022, the EPF’s overseas investments generated RM8.23 billion in income, representing 52% of the total gross investment income recorded.
A total of RM1.88 billion of the RM15.85 billion gross investment income was generated for shariah savings and RM13.97 billion for conventional savings.
“Shariah savings derived its income solely from its portion of the shariah portfolio while income for conventional savings was generated by a share in both the shariah and conventional portfolios,” Amir added.