Home > News > Research > Malaysia’s Largest Pension Returns 14.13% in 2017
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Malaysia’s Largest Pension Returns 14.13% in 2017

Employees Provident Fund also declares highest dividend in 20 years.

By Michael Katz

Malaysia’s RM800 billion ($203.33 billion) Employees Provident Fund (EPF) gained RM53.14 billion in gross investment income in 2017, a 14.13% increase  from the RM46.56 billion reported the previous year. It has been growing annually at 11.9% since 2007. 

The EPF also declared a total dividend payout of RM48.13 billion, or $12.24 billion for 2017, a 30% increase from the previous year’s payout. The fund declared a 6.9% dividend for its Simpanan Konvensional account, which is equal to RM44.15 billion, and 6.40% for its Simpanan Shariah account, or RM3.98 billion.

“Simpanan Shariah has shown a strong performance considering that this is its first dividend declaration,” said EPF Chairman Tan Sri Samsudin Osman in a release. “This reaffirms the strength and health of EPF’s shariah asset and should come as good news to our members who have switched to Simpanan Shariah. As for Simpanan Konvensional, the 6.90% was the highest rate ever announced since 1997.”

The fund said the dividends were calculated from total gross realized income for the year, after deducting the net impairment on financial assets, unrealized losses due to foreign exchange rate and derivative prices; investment expenses, operating expenditures, statutory charges, and dividend on withdrawals.

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Gross investment income for 2017 was RM53.14 billion, the highest since the EPF was created in 1951. Simpanan Konvensional accounted for RM48.54 billion of that amount, while Simpanan Shariah was responsible for RM4.60 billion. Simpanan Shariah derived its income exclusively from its portion of Shariah assets, while Simpanan Konvensional generated 62% of its income from non-Shariah assets, and 38% from its Shariah assets.

EPF said the returns for Simpanan Konvensional were enhanced by the income generated from non-Shariah investments following the outperformance of global banking stocks, while Simpanan Shariah does not include conventional banking stocks due to their non-Shariah compliant status.

“There will always be a deviation in Simpanan Shariah returns from Simpanan Konvensional in the short-term,” said Samsudin. “However, the returns are expected to be similar over the long term as both share the same investment objectives and strategies.”

The dividend rates for Simpanan Konvensional and Simpanan Shariah were 2.61% and 3.11%, respectively, for 2017, over an inflation rate of 3.79%. For the past three years, the EPF has declared a rolling three-year real dividend of 3.51% and 3.67%, which the fund said exceeded its strategic target of 2% real dividend.

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Home > News > Research > Danish Pension Fund ATP Returns 29.5% in 2017
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Danish Pension Fund ATP Returns 29.5% in 2017

Fund adds $4.9 billion for total assets of $126.9 billion.

By Michael Katz

Danish pension fund Arbejdsmarkedets Tillægspension (ATP) returned 29.5% for 2017, adding DKK29.7 billion ($4.9 billion) to its investment portfolio for total assets of DKK769 billion before expenses and tax. The growth  was attributed to strong returns from global equities, and moderate interest rate increases in Europe.

“We achieved an exceptionally solid return in 2017 and generated the best investment return in many years,” said ATP CEO Christian Hyldahl. “The strong performance is due to positive contributions from virtually all asset classes, which has made it possible to increase pensions for all members, while also being able to build up our bonus potential by DKK17.3 billion.”

ATP’s profit for the year was DKK24.7 billion before life expectancy update and increase in pensions. DKK1 billion was transferred to guarantees as a result of increased life expectancies. The fund has earned an 8.1% average annual return for the past 20 years.

Private equity provided a return of DKK5.3 billion, listed international equities generated DKK4.9 billion, while listed Danish equities brought in DKK4.2 billion. The fund’s bonus potential, which is managed in the investment portfolio, was DKK117.7 billion as of year-end 2017.

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ATP’s hedging strategy results before the effect of the yield curve break were DKK1.5 billion, or less than 0.25% of the guaranteed pensions. Overall, hedging activity results were negative by DKK1.5 billion due to ATP fixing the interest rate at 3% after the 40-year mark on the discounting curve.  

The fund’s supervisory board raised its long-term performance target to 11% from 7%, which it said was to underpin the objective of preserving the real value of pensions. In 2018, the performance target is equivalent to DKK12.9 billion, which the fund said is a long-term objective, and not one that necessarily will be reached each year.

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