KUALA LUMPUR: Employees Provident Fund’s (EPF) investment income from equities declined to RM21.49 billion in 2019, down 24% from RM26.66 billion in 2018.

Equities remain the main contributor to the provident fund’s investment income, accounting for 47% of its total investment income in 2019, while fixed income instruments 43%.

In contrast, income from investments in fixed income instruments performed better last year, grew by 17.7% to RM19.60 billion in 2019 from RM16.64 billion in 2018. The fixed income instruments comprise Malaysian Government Securities & Equivalent and Loans & Bonds.

Meanwhile, Real Estate & Infrastructure contributed RM3.03 billion or 6% to the fund’s investment income, while Money Market Instruments contributed RM1.70 billion or 4% to investment income during the year, according to its statement released today.

Given that equity investments are the key contributor, this may explain why the provident fund has declared lesser dividend at 5.45% in 2019 -- the lowest since 2008 when it declared 4.5% after the meltdown of the global equity markets caused by the Global Financial Crisis then.

Furthermore, EPF noted that the payout amount required for each 1% of the dividend in 2019 for Simpanan Konvensional increased to RM7.65 billion from RM6.99 billion in 2018.

For 2019, the EPF reported a gross investment income of RM50.29 billion, with two-thirds coming from stable interest and dividend streams. Of the RM50.29 billion, RM45.82 billion was attributed to Simpanan Konvensional.

In terms of investment asset allocation, 49% was allocated to fixed income instruments for capital preservation purposes, while 39% was allocated to equities, for capital enhancement purposes in 2019.

Money market instruments for capital preservation and liquidity management comprised 7%, while real estate and infrastructure for capital preservation and capital enhancement purposes made up another 5%, said the statement.

The EPF’s total assets stood at RM924.75 billion as of Dec 31, 2019, of which 30.3% is invested abroad across all asset classes and both Shariah and Konvensional portfolios, and contributed 41% to the overall gross investment income.

Meanwhile, external fund managers managed 14.4% of the total funds and contributed 18.3% to overall gross investment income.
For Shariah investments in 2019, the gross investment income was RM17.88 billion, with a quarter of this attributable to Simpanan Shariah and the remainder attributable to Simpanan Konvensional.

The payout amount required for each 1.0% of the dividend in 2019 was RM0.83 billion, compared to RM0.73 billion in 2018.
From the total investment assets, 37% was invested in the Shariah portfolio. Out of this portfolio, 47% was allocated to fixed income instruments for capital preservation purposes. The allocation to equities for capital enhancement purposes was 42%.

Money market instruments for capital preservation and liquidity management comprised 8% while real estate and infrastructure for capital preservation and capital enhancement purposes, made up another 3%.
As 2019 was a good year for shariah fixed income instruments, which provide a measure of income stability in a volatile environment, its income from capital gains increased due to lower yields. Investment income for Simpanan Shariah in fixed income instruments in total contributed 47%, or RM2.10 billion, compared to RM1.75 billion in 2018.
For the year under review, equities contributed 45% to the Simpanan Shariah investment income amounting to RM1.99 billion compared to RM2.63 billion in 2018.
Money Market Instruments contributed RM0.24 billion or 5% in Simpanan Shariah investment income in 2019, while Real Estate & Infrastructure contributed RM0.14 billion or 3% to Simpanan Shariah investment income during the year.