EPF cashing in on UK property

THE Employees Provident Fund (EPF), which manages some RM636.5bil worth of assets, said it is planning to sell one or two properties it own in the UK and use proceeds from the disposal for new investment elsewhere.

The country’s pension fund owns about 20 properties in the UK, including several office buildings in London and 12 hospitals acquired in 2013 for RM3.28bil.

The total value of properties it owns in the UK is estimated at £2bil (RM10.7bil).

“I can’t disclose this (the planned disposals) in detail as we are still in the midst of negotiations,” CEO Datuk Shahril Ridza Ridzuan (pic) told a press briefing yesterday.

“The announcements will be made when the time comes and when or if we get the right price for the assets,” said Shahril.

The EPF had been aggressively expanding its portfolio overseas in the past five years. In 2009, foreign investment accounted for 6% of the fund’s total asset.

It now stood at approximately 23% as of end of last year. Over the next three years, assets overseas is projected to make up 26% of the fund’s total assets.

“Investing overseas is not inherently riskier than investing in Malaysia. What we have to look at is the actual assets that you invest in and the risk returns that one expects from it,” Shahril said.

“Today we have a spread of over 20 to 30 different markets, fixed income, hybrid corporates and loans and equities, retail and development assets, among others,” he added.

The bulk of its assets overseas are in the equity markets. Strong returns from these investment in the US and Europe last year helped the fund to declare its highest dividend payout since 2000.

A total of RM36.66bil in profits was credited to EPF members’ accounts last year, which is an all-time high.

“The growth of our investment assets averages between 10% and 11% annually, outstripping the growth of the local capital market,” Shahril said.

EPF made its first foray into the UK property market in 2009, scooping up good commercial assets at relatively cheap prices amid a downturn following the global financial crisis.

A property boom in the UK in recent years, however, have seen prices soaring, while at the same time driving down yields.

Shahril said strong investors’ interest in the UK property market offers the fund the opportunity to cash in on some of its earlier purchases that had gone significantly up in value.

“We will focus on logistics, infrastructure real estates in places like Europe and Australia, aside from Japan,” he said, stating that EPF’s goal has always been finding value and adopting the strategy of going into the market first with the emphasis of growth and yields.

In February this year, the EPF made its first foray into the Japanese property market with the 14 billion yen (RM427mil) acquisition of five logistics facilities owned by trading house Mitsubishi Corp.“We have been acquiring good value assets overseas and are working hand in hand with Ministry of Finance and Bank Negara to ensure that our activities don’t cause any unusual fluctuations in the exchange rates,” Shahril said, noting that the fund’s foreign transactions tend to be lumpy in nature.

It is estimated that EPF has over RM150bil invested overseas, of which about two third of the money in companies including Apple, Google Inc and Samsung.

Despite its growing presence overseas, the EPF still remains the single biggest investor in Bursa Malaysia. The EPF is considered a substantial shareholder in over 80 companies listed on Bursa Malaysia.

Shahril said the lack of liquidity in the local market represent a risk for EPF.

“However, when we invest overseas and because of the size of the companies we invest in, we can reduce the liquidity risks and exit the company if we feel it is not going well for us,” Shahril said.

Despite the fund’s more aggressive investment appetite, Shahril stressed that EPF does not make any significant changes to its overall investment strategy.

“Our strategies are still focused on a well-diversified portfolio of assets across mutiple asset classes,” he said.

On his outlook for the year, Shahril said the EPF would be overweight on equities given the poor outlook on fixed income yields this year, adding that it would look at the value proposition of the assets prior to investing.

The EEPF owns a substantial stake in RHB Capital Bhd and Malaysian Building Society Bhd (MBSB), two financial institutions that was involved in the failed merger with CIMB Group Holding Bhd. “One of the big issue we faced last year during the proposed merger was the rights as a shareholder in relation to these companies,” Shahril said.

On the proposed acquisition of Kian Joo Can Factory Bhd, Shahril said the delay was due to certain legal issues that is being resolved. he expects proposals would be brought to the company’s shareholders to decide.

Other recent deals at home includes the RM1.4bil plan with its Australian partner Goodmans International to develop logistic assets in the Klang valley area.

source by:http://www.thestar.com.my/Business/Business-News/2015/04/11/EPF-cashing-in-on-UK-property/?style=biz