The Employee Provident Fund (EPF) will continue to spread out its investment portfolio in overseas properties in Japan, UK, France and Germany to help pay steady dividends to its contributors, which have amounted to 14 million.
EPF’s head of global real estate private markets department Kamarulzaman Hassan explained that the move was necessary as it had become a “big fish in a small pond” in the local real estate market.
He explained that prior to the 1997 Asian financial crisis and the 2007/09 global financial crisis, EPF only invested in Malaysia.
“We were badly hit in 1997 because we put all our eggs in one basket. As we progressed, we believed that diversification is important in order to reduce risk for our contributors,” said Kamarulzaman.
EPF has invested more than £1 billion in the UK and more than €1 billion in France and Germany since 2008/09. It can invest up to 4% to 5% of its funds in domestic and foreign real estate.
It has the mandate to invest up to 26% of non-Ringgit denominated assets, which include equities, bonds and real estate. It has a total fund size approaching RM700 billion.
Besides real estate, EPF has invested in the logistics sector in Japan and Europe. It is also looking at investing in retail sector, office sector and logistics in the UK and Europe.
Kamarulzaman said its average net yields were 7.5% to 8% for logistics, 6.5% to 7% for retail and 6% to 6.5% for the office sector.
He added that EPF favours the markets in Europe and Japan as they are far larger and have greater liquidity. For example, it takes only about two months to complete a property transaction in the UK. Such transactions often take up to a year in Malaysia.
The mature markets are also deemed to be more stable, although each country is different, Kamarulzaman said. However, EPF is not directly investing in US properties because the returns are lower compared to other parts of the world.
[Source]
