Employees Provident Fund of Malaysia has established a new management structure for its global property portfolio following the departure of its real estate head.
EPF’s former global head of real estate, Kamarulzaman Hassan, has changed his role within the Kuala Lumpur-based public pension fund, a spokeswoman from EPF’s press department confirmed to PERE. He is now working in asset management elsewhere in the organization, the spokeswoman said without elaborating further.
Going forward, the overseas real estate portfolio managed by Hassan will be divided between two of EPF’s senior managers. Assets and investment activities in the US, UK and elsewhere in Europe are now headed by Annie Rosle, while Japan, Korea and Australia operations are being headed by Saidatul Hishan Mohammad Salleh. Meanwhile, Mohd Auzir Zakri Abd Hamid continues as the Malaysian investor’s head of domestic and Southeast Asia real estate.
At the end of March 2018, EPF had assets under management valued at RM814.38 billion ($197.7 billion; €172.8 billion), according to the pension fund’s latest quarterly report. Of this, RM40.42 billion, or close to 5 percent, was invested in the pension plan’s real estate and infrastructure portfolio.
According to one advisor familiar with EPF’s real estate activities, the public pension fund holds potential to become a more noticeable actor in global real estate markets. The advisor dubbed EPF’s investment approach as a “silent assassin.”
“They are very smart and have a well-established local office in London,” the advisor said. “EPF is not as well-known internationally as other Asian actors like China Investment Corporation or South Korea’s National Pension Service, but I think they are up-and-coming for sure.”
The advisor’s view is backed by EPF’s Strategic Asset Allocation plan for 2017-2019. The 2017 annual report stated the investor’s plans of meeting the median allocation target of 10 percent for real estate and infrastructure, doubling from the current 5 percent.
“It is EPF’s long-term and forward-looking strategy to continuously increase our exposure in this asset class,” the annual report stated.
According to data from Real Capital Analytics from 2014 through 2018, EPF made real estate investments of $4 billion and divestments of $1.6 billion during that period.
Overseas investments, in real estate and other asset classes, have also helped boost EPF’s returns. For the first quarter of 2018, EPF’s overseas investments, which accounted for 27.3 percent of its total investment assets, contributed 33.6 percent to its total investment income during the quarter. Meanwhile for the 2017 financial year, overseas investments contributed close to 41.45 percent of EPF’s gross investment income for the year. That enhanced the overall returns for EPF’s investment portfolio by 1.22 percent to 7.30 percent. Real estate and infrastructure contributed with a return on investment of 8.55 percent, up from 8.22 percent in 2016.
The advisor told PERE he would not be surprised if the Malaysian pension fund starts following a real estate strategy much more autonomous from its Kuala Lumpur headquarters, like South Korea’s NPS. The Seoul-based public pension fund has established regional offices in Singapore, London, and New York, with the ambition to source and more swiftly execute on investments.
According to the advisor, EPF also has intentions of setting up an office in the US to supplement the London office in Europe. However, due to challenges arising from the US being a relatively high-tax jurisdiction, EPF is awaiting more favorable treaties involving the two countries before making the move.