Top Malaysian pension fund seeks to diversify assets for returns

[HONG KONG] Malaysia's largest pension fund is looking to diversify its investment portfolios in a bid to boost returns, according to chief executive officer Shahril Ridza Ridzuan.

The Employees Provident Fund plans to invest more in private equity, property and infrastructure, Mr Shahril said in an interview on the sidelines of the Bloomberg Markets Most Influential Summit in Hong Kong on Wednesday. In the next three to four years, the fund is aiming to boost investments in the three segments so they account for about 10 per cent of total assets, compared with more than 6 per cent currently, he said.

"From our last six to seven years of experience looking at these assets, we're now fairly convinced that they are viable asset classes, which will help us to meet our inflation-hedging targets," Mr Shahril said.

"Our long-term plan, our long-term target is to really provide a real rate of return. In order for you to do that, you need to have inflation-hedged assets."

Investors the world over are struggling to generate returns with interest rates near record lows hurt bond returns, and elevated volatility in stock markets. Singaporean investment firms GIC and Temasek Holdings are both bracing for lower returns amid global uncertainties and modest growth.

The Kuala Lumpur-based EPF, which has almost US$170 billion of assets, reported earlier this month that its second-quarter investment income dropped 26 per cent to 8.44 billion ringgit (S$2.8 billion) from a year earlier.

Fixed income accounted for almost 52 per cent of its investment assets as of June, while equities represented 41 per cent. The EPF is constantly on the lookout for property assets in the UK as other investors seek to exit after the country voted to withdraw from the European Union, Mr Shahril said.

The fund, which has a UK property portfolio worth more than £2 billion (S$3.5 billion), is particularly keen to acquire real estate assets in the logistics and health-care sectors, he said.

"For a long-term investor, you sometimes have to be counter-cyclical, that's what we tend to be," Mr Shahril said.

"Typically, when markets suffer major corrections, we come in and buy heavily."

BLOOMBERG