The Employees Provident Fund (EPF) is not changing its target of achieving a real dividend of two percent above inflation over a rolling three-year period in spite of the weak equity market.

Chief executive officer Shahril Ridza Ridzuan said should the market improve, then the ability of the pension fund to generate higher returns would be better.

“It is important to have a diversified portfolio of assets across multiple markets globally to account for individual risk in any one asset class or market,” he said.

Shahril told Bernama this when met on the sidelines of a public lecture on ‘Malaysia as the global hub for fund administration - Potential and Challenges’ yesterday organised by BNP Paribas - INCEIF Centre for Islamic Asset and Wealth Management (CIAWM).

He said EPF was also committed to deliver sustainable long-term returns of a nominal dividend of 2.5 percent on an annual basis.

Shahril explained that an asset portfolio consisting of only fixed income components could provide stable returns but then, the fund would not be able to beat inflation.

“We focus on long-term goals. Short-term price movement should not distract us from long-term goals,” he added.

EPF recently announced a 36.21 percent decline in investment income for the first quarter of 2016 compared with the same period last year due to poor performance in global and local equities.

At present, more than 45 percent or RM295 billion of EPF’s total investment assets are shariah compliant.

“EPF has to grow its investment in shariah asset by at least RM25 billion a year on average or in tandem with the total asset growth in order to maintain a minimum of 45 percent shariah asset, moving forward,” Shahril said.

Come Jan 1, 2017, the pension fund will launch the Simpanan Syariah which will have an initial fund size of about RM100 billion.

Account holders have the option to convert their savings contribution to the shariah-compliant fund.

He emphasised that the conventional and shariah-compliant funds have the same targets and risk-return profile over the long-term.

On whether EPF was considering new assets acquisitions, he said, it was constantly evaluating assets for investments either, locally or abroad.

“Malaysia’s Islamic financial markets offers a track record of 30 years, a wide selection of products, players and infrastructure, in addition to a well-governed market and well-trained professionals,” he said.

Potential to become a global hub

Meanwhile, at the public lecture, CIAWM Director Prof Dr Shamsher Mohamad Ramadili said Malaysia had the potential to become a global hub for fund administration, provided it can support a strong legal, tax and audit ecosystem.

It should also be able to provide a wide area of  financial services important for creating a sustainable business environment, he added.

CIAWM, a joint initiative between BNP Paribas Malaysia Bhd and INCEIF or The Global University of Islamic Finance, is the centre for Islamic Asset and Wealth Management.

Dr Shamsher said there were currently 75 asset management agencies in Malaysia managing assets totaling RM668.50 billion.

He said assets under management (AUM) were projected to rise to RM1.6 trillion in 2020 from RM377.4 billion in 2010.

“As for the global AUM, it is expected to exceed US$100 trillion by 2020,” he added.

- Bernama