EPF navigates market volatility

[MALAYSIA] The Employees Provident Fund (EPF), Malaysia’s largest retirement fund, reported a 13% year-on-year drop in investment income for the first quarter of 2025, earning RM18.31 billion compared to RM20.99 billion in the same period last year. This marks the fund’s lowest first-quarter investment income since 2022, driven primarily by a 23% decline in returns from equities—a consequence of global market volatility, trade tensions, and policy uncertainty, particularly surrounding US tariffs and shifting monetary policies. Despite these headwinds, EPF’s diversified portfolio helped cushion the impact, with fixed income and international investments providing stability.

Equities remained the largest contributor to EPF’s income, accounting for 59% of the total, but their performance was notably weaker due to subdued global stock markets. Fixed income instruments, including Malaysian government securities and bonds, contributed 33%, while real estate, infrastructure, and money market instruments made up the remainder. International investments, which represent 38% of total assets, generated 44% of the quarter’s income, highlighting the value of overseas diversification as domestic equities continued a years-long downward trend.

EPF’s overall asset base grew to RM1.26 trillion, with membership and contributions also rising—active members now total 8.88 million out of 16.3 million members, and contributions increased by 15% year-on-year. The fund remains committed to its dual mandate: supporting Malaysia’s economic growth by investing over 70% of annual allocations domestically, while maintaining a dynamic, globally diversified portfolio to safeguard long-term value for its members.

Implications

For Businesses:

EPF’s continued commitment to invest heavily in Malaysia—over 70% of its annual allocation—means the fund remains a critical source of capital for domestic companies, especially in sectors like healthcare, infrastructure, and technology. This ongoing support can help buffer local businesses against external shocks and stimulate growth, even when global conditions are unfavorable. The fund’s investments in mid-to-growth stage companies and strategic sectors also signal opportunities for innovation and expansion within Malaysia’s private sector.

For Consumers and EPF Members:

While the dip in investment income may raise concerns about future dividend payouts, EPF’s diversified approach and strong asset base provide reassurance of long-term stability. The fund’s ability to maintain consistent returns, even in turbulent times, is crucial for the financial security of millions of Malaysians relying on EPF for retirement. Moreover, the increased voluntary contributions and rising membership suggest growing public confidence in the fund’s stewardship.

For Public Policy:

EPF’s performance underscores the importance of policy stability and global economic integration for national pension funds. The fund’s alignment with government frameworks like Ekonomi Madani and its focus on strategic sectors support broader economic resilience and social protection goals. However, the challenges posed by global trade tensions and monetary policy divergence highlight the need for continued vigilance and adaptive policy measures to safeguard both national savings and economic growth.

What We Think

EPF’s first-quarter results reflect the realities of investing in a world marked by geopolitical uncertainty and economic headwinds. The fund’s diversified strategy—balancing domestic and international assets, equities and fixed income—has proven effective in cushioning short-term shocks, though it cannot fully offset global market downturns. The sharp drop in equity returns is a reminder that even the most robust portfolios are not immune to systemic risks.

Yet, the fund’s resilience is evident in its rising membership, growing contributions, and steady commitment to long-term value creation. By channeling significant capital into Malaysia’s economy, EPF not only supports its members but also acts as a stabilizing force for the broader financial system. Its focus on sectors like healthcare and technology positions the fund—and the country—for future growth.

Looking ahead, much will depend on the evolution of US trade policy, global interest rates, and regional stability. EPF’s ability to adapt its asset allocation and seek new investment opportunities, both locally and abroad, will be critical. For members, the message is clear: while short-term volatility may affect annual returns, the fund’s prudent management and strategic diversification remain strong safeguards for retirement security. The coming quarters will test this resilience further, but EPF’s track record suggests it is well-equipped to navigate uncertainty and deliver sustainable value.