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EXCLUSIVE: Malaysia’s EPF plots global expansion

The Employees Provident Fund (EPF) of Malaysia, plans to expand real estate investing in Continental Europe, the US, Japan and China and is planning to open an office in London.

Malaysia’s $187 billion Employees Provident Fund (EPF) plans to expand real estate investing in Continental Europe, the US, Japan and China and is planning to open an office in London, it has told PERE.

In an interview published in this month’s PERE magazine, the investor said in the past 12 months it has begun to acquire assets in France and Germany, and intends to look to southern European markets such as Italy and Spain next. 

And, as it gains more visibility in a particular market, EPF plans to establish an on-the-ground presence to better monitor local opportunities. To that end, EPF expects to open its first offshore office in London to provide a launch pad into the regional markets of the UK and wider Continental Europe.

“We are looking at Europe as a whole,” said deputy chief executive officer responsible for investment, Mohamad Nasir Ab Latif. “There are many countries in Europe – places like Spain and Italy – which we have yet to look at.”

“We are also looking to Asia,” he added.

The Malaysian fund currently has RM13.3 billion ($4.2billion) of real estate assets under management, split between domestic and foreign portfolios. However, it sees itself as being under-invested in the sector having invested just over one-third of its allocation so far. Nasir told PERE that real estate accounted for 2.2 percent of assets under management, whereas the target allocation was 6 percent. 

Further explaining, Nasir said eventually the fund wanted to see up to 10 percent of its funds invested in real assets with property accounting for the lion’s share under its “four plus two” formula – 4 percent for offshore markets and 2 percent for domestic markets.

EPF is a relative newcomer to global property markets and readily admitted that just four years ago, few people outside Malaysia had heard of it, even though it was established in 1951 making it one of the longest-established retirement savings funds in the world. 

The fund, which was created to look after the retirement savings of the country’s private sector employees, has set out to be “conservative”. Nasir said: “We need to be very careful in how we handle this money. So we are a very conservative investor. To preserve our capital, we don’t take too much risk.”

He added: “A key strength of a retirement savings funds like ours is that we have a huge amount of liquidity. Given this, we can take longer positions, and this means we can put more into assets, which are not so liquid – private equity, infrastructure and real estate.”

As well as expanding in Europe, Nasir also said EPF was keen to invest in the US, where it has interests in office buildings in New York, Los Angeles and San Francisco.

He said: “Our strategy is to invest through US funds. The tax implications of holding assets directly in the US are very restrictive for international investors.”

In addition, over the next six to 12 months, EPF will pay more attention to Japan as it seeks to acquire office and logistics properties.

It has already dipped its toe into the water in China through an investment in a Chinese property fund. Mohamad Hafiz Kassim, senior general manager in EPF’s private markets department, said in the interview: “Currently, we are still building our experience. We have a plan for China but we want to build up our exposure in China slowly – as we become more comfortable with that market.” 

Over the next couple of years, EPF can be expected to form partnerships to access Chinese real estate, he explained. 

To read the interview in full, see this month’s edition of PERE magazine.