EPF increases RE investments by 34%

Malaysia’s largest pension fund placed a heavy emphasis on property as it increased international investments.

The RM587 billion (€130 billion; $180 billion) Employee’s Provident Fund of Malaysia (EPF) ramped up its property portfolio domestically and internationally last year, adding approximately 34 percent year-on-year, according to the fund’s annual report. Its total real estate assets grew to RM16.4 billion from RM12.3 billion in 2012.

EPF’s additions to its portfolio saw its property allocation grow to 2.8 percent from 2.3 percent in 2012, another small step towards its overall 6 percent target.

The increase comes as part of an organization-wide effort to increase its exposure to overseas assets. Indeed, its overseas investments increased to 21 percent by the end of 2013 from 17 percent one year prior.

“Over the last few years, we have begun to focus on real estate and infrastructure investments that meet our risk-reward criteria while also progressively stepping up our participation in the private equity space,” EPF chief executive Shahril Ridza Ridzuan said.

EPF’s investments in property joint ventures also featured prominently on the fund’s real estate activities. The firm added seven property joint ventures to its portfolio, particularly in the US and Europe. With 11 joint venture platforms overall now, EPF’s JVs grew in value from RM208 million to RM814 million in the last year.

One of those joint ventures was the €500 million KWASA Goodman Germany (KGG), which EPF just last month doubled its allocation to. The JV is held on a 70:30 basis with Sydney-based developer-cum-fund manager Goodman Group, and is mandated to buy completed logistics properties in Germany. EPF is understood to have already begun looking at other opportunities in European countries including France and Spain.

Ridzuan credited the fund’s progressive allocation to alternatives like property for both the growth in overseas investments and the overall return on investments. The retirement fund achieved a return on investment (ROI) of 6.97 percent in 2013, a slight increase from the 6.87 percent ROI achieved in 2012.

“The major challenge that the EPF faces in the coming year is managing a continuously growing asset base in an investment environment that continues to be uncertain,” EPF chairman Samsudin Osman said. “The global economy is likely to continue its below trend growth, which may affect our international investment returns.” As such, both Osman and Ridzuan pointed to alternatives like property as essential return buffers for EPF going forward.