Three alternatives to increase EPF performance
SHAH ALAM - Economists have suggested three investment alternatives that the Employees' Provident Fund (EPF) can consider to ensure the dividend return performance increases by at least six per cent in the upcoming years.
Universiti Tun Abdul Razak economist Professor Barjoyai Bardai said the three investment alternatives were venture capital, real estate and initial public offering (IPO).
He said venture capital investments involved investment in new technology that will bring greater returns if it is successful in generating profits.
"But sometimes, there will be a loss as the chances of making big profit is only 10 per cent and the remaining 90 per cent were chances of loss.
"Secondly, real estate investment. Usually the capital is safe as the value will increase but the profit received every year will be in the form of rental or listing.
"Profit in real estate investment comes in the long term. The value could go up if you do a 10-year investment," he told Sinar Harian.
Next, Barjoyai explained IPO investment is an initiative where a new listed company need institutional shareholders to strengthen the organisation.
"When someone buy shares at a cheap price before it is listed, the market price will usually increase up to five or six times when it is listed.
"Then EPF can make profit. The only issue is that there are not many new companies in this relatively gloomy stock market environment, so chances of becoming an institutional investor are relatively low.
"In the past, Permodalan Nasional Berhad (PNB) had focused on IPO investment so they were able to give 10 to 15 per cent of return," he said.
The highest EPF dividend recorded was 8.5 per cent in the year of 1983-1987. In the 23-year period between the year 1999-2021, EPF recorded dividend payments exceeding six per cent for nine times.
The dividend rate announced last Saturday, for the year 2022 was 5.35 per cent for conventional savings and 4.75 per cent for shariah savings.
Meanwhile, economic analyst Associate Professor Dr Ahmad Azrin Adnan said EPF's biggest challenge in terms of financial performance was finding a long-term investment that is resilient.
He said it is not easy for EPF to record a better performance during this challenging global economic environment compared to pre-Covid years.
"It is coupled with the demand for targeted EPF withdrawals which somewhat reduces the accumulated amount of retirement funds.
"This is evident from the significant decrease in gross investment income in 2022 compared to 2021.
"Perhaps EPF can consider increasing the amount of investment in high-risk and shariah-compliant portfolios," he said.
