The Employees Provident Fund (EPF) today declared a dividend rate of 6.40 percent for 2015 with a total payout amounting to RM38.24 billion.

The payout amount required for every one percent dividend rate for the year was RM5.98 billion, which was 10.13 percent higher, compared with RM5.43 billion in 2014, it said in a statement.

The increase was in tandem with the growth in EPF's investment assets, which stood at RM684.53 billion as at Dec 31, 2015, while gross income grew 13.18 per cent to RM44.23 billion compared with RM39.08 billion in 2014.

"The gross investment income achieved was due to our diversification strategy across multiple asset classes in various countries and markets.

"Although the correlation is high among global markets, the diversification strategy allowed us to take opportunities through profit realisation and seek potential investments at attractive valuations," EPF chairperson Samsudin Osman said.

He said EPF’s diversification into global assets and currencies allowed it to realise significant gains with profits from non-ringgit sources, making up 48 percent of total gross investment income throughout the year.

"As a retirement savings fund, our investments have always emphasised on sustainability of returns over a long-term horizon as opposed to short-term gains and we are pleased to declare a dividend rate of 6.40 percent, a commendable performance given the prevailing challenges," he said.

Equities main contributor

More importantly, he said EPF was able to meet its two strategic investment targets of at least 2.5 percent nominal dividend on a yearly basis as required by the EPF Act 1991 and at least two percent real dividend on a rolling three-year basis.

For 2015, Samsudin said the rolling three-year real dividend was 4.05 percent, which was 205 basis points higher than the target.

During the year under review, equities continued to be the main contributor of income at 58.81 percent amounting to RM26.01 billion or up 13.54 percent from RM22.91 billion in 2014.

The statement said foreign equity portfolio played a significant role in 2015 by generating more than 50 percent of the income from equity investment.

Meanwhile, EPF’s investments in fixed income instruments continued to provide a stable stream of income with the asset class, comprising Malaysian Government Securities (MGS) & equivalent and loans & bonds in total, contributing 35.40 per cent of the RM44.23 billion gross investment income for the year.

Real estate and infrastructure asset class contributed RM1.70 billion, up 22.23 percent from 2014, whereby the foreign investment class, which was initiated in 2010, showed encouraging performance over the years.

"Our structured overseas investment programme, which formally started in 2006, contributed 48 percent of the total RM44.23 billion investment income this year despite being only 25 percent of our total investment size, thus outperforming our domestic assets," Samsudin said.

2016 to be more challenging

As EPF gears up for the launch of its Shariah retirement saving scheme in 2017, its exposure to Shariah compliant investments covering multiple asset classes to date exceeds 40 percent of total assets.

EPF also ensures that all investments, including the non-Shariah assets, are ethical in nature, which filters out investments in sectors that promote gambling, alcohol/liquor and military weapons, among others.

Commenting on the economic climate in 2016, Samsudin cautioned that this year would be more challenging.

"A combination of growth fears and depressed commodity prices have seen most major indices fall, including the FBMKLCI, since the start of the year.

"This is a very different climate than the first half of 2015 in which our investments in global markets were able to mitigate the impact from the domestic market downturn," he said.

The volatility in the currency markets also means that it will be difficult for the EPF to repeat the outperformance in global assets it saw in 2015.

"Nevertheless, we will continue to preserve and further enhance the value of capital from members’ contribution by maintaining stable and consistent returns over the long term within tolerable risk limits," he said.

- Bernama