The Employees Provident Fund (EPF) is setting its sights on Shariah-compliant stocks and is looking to allocate an estimated RM100 billion to RM120 billion from its investment funds to offer its members a chance to participate in such a fund.
The fund will be launched by January 2017.
Deputy CEO (Investment) Datuk Mohamad Nasir Ab Latif said they have already begun setting up the framework for this. He added that the EPF, which invests on behalf of its members, is in the process of identifying companies to invest in.
Datuk Mohamad Nasir told The Star that the Shariah-compliant fund will be opened to all but will be on a “first come first served” basis as they might not be able to accommodate everyone at the start.
The pension fund currently has total investment assets of about RM685 billion.
“Our challenge will be when too many members ask for it and we do not have enough (Shariah-compliant) assets. But as we go along, we can increase the size of the funds invested in such stocks,” he said.
He explained that while they are not Shariah-compliant at the moment, they have always stuck to “ethical” choices of investments. For example, EPF has never invested in gambling or alcohol stocks.
However, the EPF still holds close to a 7% stake in the cigarette company British American Tobacco (M) Bhd (BAT). Datuk Mohamad Nasir shared plans to exit the stock once it has reached its full potential.
The Deputy CEO further explained that the EPF took into account environmental, social and governance practices when it considered a company for investment.
He stressed that the EPF had a very prudent investment process and was well diversified in its investments.
He said preservation of capital was the fund’s key criteria and it tried to avoid investments that had no proven track record.
He also hinted that the amount of dividends that will be paid out to members for the year 2015 (due to be announced soon) will be “respectable”, despite the challenging economic climate.
Last year, the pension fund announced a 6.75% dividend payout for 2014, higher than the 6.35% payout it had declared for 2013.