Thursday, August 09, 2018

EPF - Stay The Course





































Do not break the mould or change the wheel if it is not broken. EPF must stay the course and not try to fix what is not broken.

As expected but pleasant news nonetheless, was EPF's 6.9% declared dividend for 2016. All the more so in the present correction phase for global equities. 



The Comparison With UK & European Pension Funds


In the UK, the average fund ended 2016 up 15.7 per cent. The last time pension funds returned more than 15 per cent was in 2009, when recovery from the 2008 crash saw average growth of 22 per cent.  It represented a 13 percentage point increase on pension fund returns of 2.6 per cent in 2015 and the fifth consecutive year of pension growth, after the 4.6 per cent loss in 2011.

Comparison with UK pension funds is not really fair or comparable as their fund allocation usually are more aggressive, and they may also lack access to local government bonds inherent "structure and returns, and maybe safety". But I brought this up to show how volatile the returns can be, in the case for UK pension funds. 

The same can be said for the European pension funds. I'd rather see my country's pension fund making around 5% a year, year in year out, than to see volatility. We need our pension funds to be dependable, not flamboyant.

Look at the returns for EPF below, in particular for 2008/2009 or even 1998/1999. During the former period, we had the subprime financial meltdown. In the latter period, a more relevant Asian financial crisis prevailed, but EPF maintained decent dividends. EPF deserved a lot more credit than what they get from Malaysians in general. It is so difficult to maintain a return of around 5% a year for over 20 years. A lot of it has to do with their objectives, and the structure that they have laid out and the way they executed decisions. Their independence MUST and SHOULD never be compromised (read between the lines). 

As the size of fund grows, over the last 3 years in particular and onwards - it has gotten more difficult to maintain similar dividends as basically, you are running out of ringgit assets to invests in. Hence their decisions to invest more overseas and even in regional/global private equity are necessary. 

On that note, it is imperative that "sustainable, proven, stable, sizable" assets such as PLUS should never leave the stable of EPF. Even if the price offered is tremendously attractive, say at a forward PER of 40x, because such a high price will and can only come back to haunt us via higher toll rates.


Kadar Dividen
Tahun
          Peratus             (Simpanan Shariah)
        Peratus            (Simpanan Konvensional)
2017
6.40
6.90
2016
-
5.70
2015
-
6.40
2014
-
6.75
2013
-
6.35
2012
-
6.15
2011
-
6.00
2010
-
5.80
2009
-
5.65
2008
-
4.50
2007
-
5.80
2006
-
5.15
2005
-
5.00
2004
-
4.75
2003
-
4.50
2002
-
4.25
2001
-
5.00
2000
-
6.00
1999
-
6.84
1997 - 1998
-
6.70
1996
-
7.70
1995
-
7.50
1988 - 1994
-
8.00
1983 - 1987
-
8.50
1980 - 1982
-
8.00
1979
-
7.25
1976 - 1978
-
7.00
1974 - 1975
-
6.60
1972 - 1973
-
5.85
1971
-
5.80
1968 - 1970
-
5.75
1965 - 1967
-
5.50
1964
-
5.25
1963
-
5.00
1960 - 1962
-
4.00
1952 - 1959
-
2.50



For a better case study, just go and research and compare the similar HK Fund or the much maligned but steady CPF. Below is the volatile HKMPF returns. We don't such volatility for a pension fund.

















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