Is EPF Money Stolen

On 12 September 2017, Prime Minister Datuk Seri Najib Tun Razak had announced that the EPF and Khazanah Nasional to expand their investment in US and purchase more Boeing jets to strengthen the country’s economy.

 

An Overview on EPF

EPF manages the compulsory savings plan and retirement planning for private sector workers in Malaysia. EPF is owned by 14.8 million members. Out of this figure, 6.9 million members are actively contributing to this fund. It has an investable asset amounting to RM 731 billion.

 

The Size of the Proposed Investment in US

The EPF alone is expected to invest between USD 3 Billion to USD 4 Billion. Using the exchange rate of 1USD to 4.2 MYR, USD 4 billion is worth RM 16.8 billion.

 

What can RM16.8 bil do Alternatively?

Here are some example on what RM 16.8 billion does:

  • 5 times the cost of building LRT 3 or
  • 14 times the value of Old Town Berhad or
  • 2017 budget for Malaysia Ministry of Defence

This amount may seem huge but it is only 2.3% of EPF total investable assets size. (Do a visual comparison of this amount and EPF size).

 

Why does EPF Invest in Overseas?

One may think EPF should keep the money in our nation and use it to develop it. However, EPF invests in overseas

  • To get a better return for the members
  • To avoid crowding out effect in local market

How Big is EPF’s Overseas Investment

The investment climate in Malaysia has not been great over the past few years. Currently, EPF has invested close to 30{a9ec73809aa109893d33fb6529d5301eedef46e5a338ed53b4588225f8c561d4} of its money in markets outside Malaysia and the return from overseas market has outpaced domestic equities.

Overseas VS Domestics Returns

Domestics Overseas
2014 6.34% 10.45%
2015 5.74% 12.84%
2016 6.18% 9.73%

Here is an overview of EPF’s return over the years

2011 6.00
 2012 6.15
 2013 6.35
 2014 6.75
 2015 6.40
 2016 5.70

 

One may argue that 6% is easily achievable in a bull market, one must not forget that most unit trust in Malaysia fail to beat this benchmark and the investing strategy adopted by EPF is not aggressive. EPF is a retirement saving fund that prioritises the capital preservation of members’ savings.

Conclusion:

Be a wise man, think about it and stop being influenced by what you are being fed

 

Source: The Star, EPF, Malay Mail Online