KUALA LUMPUR • Malaysia's US$178 billion (S$240 billion) pension fund plans to double its real estate assets in the next few years as it seeks to diversify its holdings that are mostly invested in bonds and stocks.
The Employees Provident Fund (EPF), whose property investments include 11-12 St James Square and the Battersea Power Station project in London, is now looking at buying more assets in continental Europe, chief executive officer Shahril Ridza Ridzuan said on Tuesday. EPF manages the retirement savings of more than 13 million people.
"Our real estate exposure is very small, less than 4 per cent, at this point in time," Datuk Shahril said. "It's the fastest growing part of our business. The goal is for private market assets to take about 10 per cent of the total fund size in five to seven years."
EPF joins sovereign wealth funds looking to raise their global real estate investments. Oslo- based Norges Bank Investment Management, the world's biggest wealth fund, aims to invest 50 billion kroner (S$8 billion) each year in properties while GIC, the manager of more than US$100 billion of reserves, wants to focus on larger, deeper markets and "gateway cities".
The Malaysian fund's foreign real estate and infrastructure investments have grown by an average of more than 50 per cent per annum, said its 2014 annual report. Since 2009, it has been investing in property as a hedge against inflation. With 51 per cent of its investment assets in fixed income instruments and 42 per cent in equities as of December 2014, EPF's returns are influenced by interest rates and inflation movements.
The fund also favours Malaysian plantation companies for their strong earnings margins and cash flow, said Mr Shahril. He also sees value emerging in banking stocks, following recent declines in the shares. "We do like the financial sector at this point in time. We think it has probably beaten down enough that you have clear value emerging in that sector," he said. "Malaysia is still going to have economic growth of 4 per cent to 4.5 per cent. So if investors believe in that macro story, banks are always a good place to have that exposure."