Employees Provident Fund (EPF) again rebutted the Opposition's claim that its investment in controversial 1MDB posed high risks.

On the contrary, chief executive officer of EPF Shahril Ridza Ridzuan held, there was only extremely low risk in terms of exposure.

“If the people want, they can group that (1MDB's acquisition of power plants back in 2012 and 2013) as exposure, but from our point of view, it is extremely low risk.

“It is no different from our exposure in other power plants, like Malakoff or the one once held by Tenaga Nasional Berhad (TNB),” he explained today.

He said 1MDB's cash flow was financed from sale proceeds, and the state-owned fund never missed payments and never once suffered a credit downgrade.

1MDB had raised a RM5 billion bond in 2009, where EPF took up a share of RM200 million, which is fully guaranteed by the government.

In October last year, Rafizi had said the investment of EPF in 1MDB had posed a high risk based on high interest rates and the quantum of investment of RM1.72 billion.

Shahril, however said circumstances would change when 1MDB sells off its energy assets to a foreign company as bond holders will not suffer and that this was no different from anywhere in the world.

“We are not particularly concerned about this either. From last year I always said, from EPF's point of view, this is not a particularly big thing in term of credit exposure,” he emphasised.

Rafizi had raised the concern as RM1.72 billion invested was public's savings managed by EPF.

Rafizi added that a yardstick as to whether a bond investment is high-risk or not depended on the coupon rate which is to be paid by the bond issuer to the bond-holder.

Rafizi then drew the conclusion that 1MDB's 9.85 percent coupon rate showed the high risk of its finances, as the rate was higher than market rate - approximately five percent.

Fall in equity market worldwide

In the media briefing today, Shahril also explained the reason EPF set the dividend at 6.4 percent for 2015, which is 0.35 percent lower than in 2014, when EPF enjoyed much more gross return on investment (ROI) last year.

EPF had received a 7.48 percent gross ROI in 2015 as compared to 7.25 percent in the year before, according to him.

“We set the dividend at 6.4 percent or RM38.24 billion. This is the biggest amount ever paid since its inception,” he said.

The main reason for the higher ROI but lower dividend was due to the fall in equity market worldwide and this has impacted all funds, including EPF, Shahril added.

He said EPF had suffered RM3.496 billion in gross impairment, amounting to 0.51 percent out of its RM684.52 billion total investment last year.

The fund only faced RM984 million gross impairment, or 0.15 percent out of RM636.53 billion total investment in 2014.

“Being an extremely prudent financial institution, we fully adopt international financial reporting standards (IFRS).

“The EPF has always taken provision for losses in equity value through our P&L (profit and loss), thus it affects net income,” Shahril said.

The country's biggest savings fund had received RM44.23 billion investment income in 2015, a 13 percent growth from 2014, which amounted RM39.08 billion.

Out of RM44 billion investment income received last year, RM26 billion came from equity market, while RM15 billion from fixed income, he added.

EPF had also benefitted from its global investment during the ringgit depreciation in particular, as it received RM21 billion or nearly half of its investment income last year.

“We took as much profit in 2015 when the market was still robust. This turned out to be the right strategy as the market almost died down this year,” Shahril said.

He also maintained the importance of EPF's overseas investment when asked about Prime Minister Najib Abdul Razak's call for the GLCs to withdraw their money parked abroad.

EPF has diverted 25 percent of its investment overseas and planned to increase to 27 percent by 2017 and ultimately to 30 percent in three years time, added Shahril.

“To be fair to the government, they never denied us from acquiring assets overseas. It is difficult to acquire the right assets. We are always mindful of overcrowding the local market,” he added.

“Both domestic and global assets are growing. Domestic is growing in single digits while the global market is in double digits,” he said.

While it continues to adopt a diversified investment measure, EPF has planas to acquire assets in real estate, infrastructure and private equity.