Why EPF Pays Lower Dividends?

[The following extract was taken from theStar, http://thestar.com.my/news/story.asp?file=/2007/12/6/nation/20071206205452&sec=nation.

Though it was a piece of news dated five months ago, it shows why EPF could not pay very high dividends. There are three main classes of investments.

(1) EPF investment in Government securities, loans and bonds, and instrumental money market takes up 80%. These investments have low rate of return with the advantage of low risk.

(2) The RM58.64bil investment in equities makes up only 19.4%. This investment fetches high return which comes with high risk too.

(3) EPF has started to invest properties, amounting RM1.72bil which is only 0.6%. This investment is of higher return and higher risk than the investment in Government securities, loans, bonds and money market.

As a large portion of EPF investment is of low return, EPF dividends average at 4.7% . ]

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Thursday December 6, 2007
EPF invests RM300bil in first 6 months of 2007

KUALA LUMPUR: The Employee's Provident Fund has invested RM301bil as at June 30 this year, Finance Ministry parliamentary secretary Datuk Seri Dr Hilmi Yahaya told the Dewan Rakyat.

He said that of the amount, RM104.21bil or 34.6% was invested in Government securities, RM112.15bil or 37.2% in loans and bonds, RM58.64bil in equities, RM24.72bil in instrumental money market and RM1.72bil in properties.

[This post was first published on May 13, 2008]