Kuala Lumpur: The Employees Provident Fund’s (EPF) future investments will be guided by its Strategic Asset Allocation (SAA), which follows a three-year investment cycle and is reviewed every three years. Chief executive officer Ahmad Zulqarnain Onn said the EPF has reviewed its SAA for 2024, setting its investment strategy for 2025, 2026, and 2027.
According to BERNAMA News Agency, the asset allocation, approved by the investment panel and the Ministry of Finance, will maintain the current balance between domestic and global investments. Ahmad Zulqarnain stated that there will be no change or reduction, aiming to keep it stable over the next three years. He explained that mathematically, this means 70-80 per cent of new money, contributed by foreign workers, will be deployed domestically, given the different risk profiles of domestic and global investments.
The total funds from foreign workers are yet to be determined. However, based on current estimates, it will not exceed RM5 billion in the first year, considering the two per cent employer and two per cent employee contributions announced by Prime Minister Datuk Seri Anwar Ibrahim. Ahmad Zulqarnain emphasized the need to improve contribution coverage, as only 60 per cent of Malaysian employees are currently covered, leaving a significant portion uncovered or non-contributing.
With only 37 per cent of Malaysians having adequate savings, there is a pressing need to move away from the lump-sum withdrawal model. As life expectancy rises, even those with sufficient savings may eventually find them inadequate. Advances in healthcare and anticipated breakthroughs in drug discovery, particularly driven by artificial intelligence (AI), mean society could live longer than expected, posing a real longevity risk. Therefore, there is a need to provide protection against this risk.
Outlining the EPF’s investment outlook for 2025, Ahmad Zulqarnain highlighted a focus on trends with multi-year tailwinds, including healthcare, AI and data, energy, and private markets. As societies age worldwide, including in Malaysia, demand for healthcare is expected to continue increasing annually. The growth in AI and data is also significant, as the digitisation of economies persists and generative AI drives further demand for data and digital assets.
Energy is another sector undergoing a multi-year shift towards e-energy. Despite developments in the United States, Malaysia remains confident that the transition to cleaner energy will continue. Although it may slow slightly due to political factors, it is expected to proceed unabated, as the cost structures of clean energy are anticipated to decline faster than those of fossil fuels. Finally, continued allocation to private markets is planned, as they have been strong income contributors and provide relatively stable returns on a risk-adjusted basis. This strategy is expected to be further supported domestically by various economic modernisation plans that have been well received by the investment community over the past two years.