Malaysia’s Employees Provident Fund (EPF or KWSP) has announced the removal of its 30% foreign fund exposure cap on Members Investment Scheme (MIS) commencing August 1 2016, permitting members to invest in unit-trust funds that are focused on overseas investments.
(note: see Part 2 HERE because not able to fit into 1 info-graphic)
That means some, but not all of the existing foreign-exposed unit trusts from multiple fund management companies have been approved for the MIS under the new amendment.
The foreign funds exposure threshold was liberalized to allow for asset diversification.
EPF unit trust investment – no change in withdrawal rules
No changes in terms & conditions for current rules of EPF unit trust investment under this new amendment. Withdrawal of EPF Acccount 1 for unit trust investment can be done on a quarterly basis – not more than 20% of savings in excess of the Basic Savings amount in Account 1. Investments under the MIS are on a voluntary basis, and provide members with another avenue to enhance their retirement savings.
EPF unit trust investment – informed risk-aware diversification
All this while, all EPF-approved investments are only in locally-exposed funds. Therefore, the cap removal is a great move to allow members to reduce geographical concentration risks.
It also means reducing your investment portfolio correlation to the local stocks market. We know that there is not really a good move to use EPF Account 1 to invest into fixed income funds, because leaving it in EPF would generate similar returns at lower costs. So most people sensibly into into equity funds.
EPF unit trust investment – i-Invest online platform to D.I.Y. (do it yourself)
Starting in Aug 2019, no more filling hard copy forms and no more thumb printing KWSP 9N forms!
Eligible Employees Provident Fund (EPF) contributers can now make informed investment in unit trust funds offered by EPF-approved Fund Management Institutions (FMIs), via the self-service i-Invest online platform within the i-Akaun (Member) portal.
“We are very excited about introducing i-Invest, as this digitally powered facility empowers our members to take control of their investments and make transactions at nearly zero cost,” said EPF Chief Executive Officer Tunku Alizakri Alias in a launch statement.
- First pension fund anywhere globally to directly link members’ retirement funds to online investment services.
- Front-load cost is nearly negligible as the EPF has mandated a maximum cap of 0.5% compared to the current 3% for offline and traditional transactions through unit trust agents or bank intermediaries.
- i-Invest platform is equipped with tools to independently compare financial information to ensure right selection of unit trust funds that suit members’ savings goals.
- EPF members can monitor their investment funds performance inside their i-Akaun, and screen the historical annual performance.
- EPF members are empowered to transfer from their EPF Account 1 up to 30% of the amount in excess of Basic Savings, to be invested in the EPF-approved funds.
- EPF members can also open an account to invest in unit trust funds with any FMI using this new facility.
There is this one gnawing problem with EPF unit trust investment…
Members may only invest in one unit trust fund house at a time, thus diversification is “slow” and not optimal.
It would be great if EPF can allow members to invest in multiple fund houses in one go, rather than just one and wait for a certain amount of time before investing in another.
For example, if you want to invest in say, global equities, we could draw RM10,000 to invest in five different unit trust funds from five different fund houses, exposed to foreign equities at a time, it would give me better diversification immediately.
Note: please allow 30 seconds for the info graphic below to load fully
Top in 2016
- Affin Hwang Select Asia (Ex Japan) Quantum Fund : 12.02%
- Eastspring Investments Global Leaders MY Funds : 11.40%
- CIMB-Principal Greater China Equity Fund : 10.60%
Top in 2015
- TA European Equity Fund : 24.5%
- CIMB Global Titans : 24.24%
- Eastspring Investments Global Leaders : 21.24%
Top in 2014
- Public Far East Select : 15.39%
- CIMB-Principal Greater China Equity Fund : 14.87%
- Affin Hwang Select AsiaPac REITS & Infrastructure : 14.22%
Top in 2013
- Eastspring Investments Global Leaders : 35.89%
- CIMB Global Titans : 34.18%
- TA European Equity Fund : 31.26%
Top in 2012
- Affin Hwang Select Asia (Ex Japan) Quantum Fund : 27.42%
- Affin Hwang Select Asia (Ex Japan) Opportunity Fund : 23.89%
- Affin Hwang Select AsiaPac (Ex Japan) REITS & Infrastructure : 20.28%
Top in 2011 (the least negative annual return)
- Affin Hwang Select Asia (Ex Japan) Quantum Fund : 6.17%
- Pheim Emerging Companies Balanced Fund : -1.82%
- RHB Global Allocation Fund: -3.29%
Looking at the performance track record and consistency above, which funds would you choose to invest into?
Facts on EPF own investment and EPF unit trust investment for members
EPF itself allocates less than 30% of its AUM – worth approximately 700 billion ringgit (US$171.7 billion) as at December 31, 2015 – to investments abroad.
The MIS contributes a sizeable portion to the UTF industry’s total FUM. Unaudited figures by the EPF show that as at end-2015, 820,000 EPF members have invested up to 39.3 billion ringgit in approved EPF approved unit trust funds.
Malaysia unit trust industry has a total of 667.88 billion ringgit in AUM as at end-2015, according to statistics from Securities Commission Malaysia.
Source: The EdgeMarket Daily
How to invest and consolidate your EPF-MIS investment into 1 account for convenience using iFast platform
iFast platform is used by independent financial adviser such as us to manage clients’ investments.
What you can do if you are ‘stuck’ with an underperforming unit trust investment – EPF or cash
You can transfer to iFast platform used by independent financial adviser (such as myself), at zero costs, and subsequently move around among most of the funds (except Public Mutual) listed above – as and when needed, also at zero costs. Annual management fee applies though. Here’s a schedule for reference.
Miscellaneous useful info
- If you need to check the list of appointed fund management institutions for unit trust investment EPF members investment scheme, click here.
- If you need to check how much you can withdraw your EPF account 1 for unit trust investment now, use this EPF calculator without login into EPF website.
- While every effort is made to ensure the information on this is updated to the latest info from EPF, always cross check EPF website for all details on EPF members investment scheme (EPF-MIS)