KUALA LUMPUR – The Employees Provident Fund’s (EPF) fully shariah-compliant investment scheme or ‘Simpanan Shariah’ that will kick in next year will exclude conventional banking from its investment portfolio.
Nevertheless, its investment strategy will still be guided by its Strategic Asset Allocation (SAA) model, with the objectives of preserving and enhancing the value of members’ retirement savings, the retirement fund said in a statement.
Implementing a fully shariah-compliant investment scheme is nothing new to the EPF, as it has all this while abided by ethical guidelines and investment policies which prohibit it from investing in sectors that promote gambling, manufacture and distribute military weapons, produce and promote alcohol as well as promote and distribute adult entertainment.
In addition, the EPF does not have any exposure in countries with no diplomatic ties with Malaysia.
The fund said the dividend rates for the Simpanan Shariah would be based on the actual performance of shariah-compliant investments made by the EPF.
Like the shariah saving scheme offered by Tabung Haji (TH), the EPF said its new scheme has the same concept in that the operations and management of investments are subject to Islamic principles and in accordance with the guidelines set by the respective organisation’s Shariah Advisory Committee.
However, the objectives for the establishment of the EPF and TH are not the same.
TH’s role as Malaysia’s pilgrims fund board is to facilitate savings for pilgrimage and to manage pilgrimage activities, while the EPF provides retirement benefits for members.
At the same time, EPF’s investment strategies and objectives are different from TH’s, including the dividend rates.
Hence, the EPF’s dividend rates cannot be directly compared with those of TH or other funds because each fund has its own different set of objectives, strategies and risks.
The EPF is a social security organisation responsible for ensuring members’ retirement well-being, and its investment strategy, which is supported by a comprehensive investment risk management framework, gives greater emphasis on investments that are prudent and low-risk and able to provide long-term stable returns.
The EPF’s Simpanan Shariah is scheduled to kick in by January 2017, with an initial fund size of RM100 billion.
Applications for the new scheme will be open to all EPF contributors who want their returns to be fully derived from Islamic-based principles.
The introduction of the new scheme is in line with the future direction of the EPF in offering more tailored products for society.
At present, EPF’s funds are fully ESG (environmental, social and governance) compliant and 45 per cent of its funds are already shariah-compliant.
As the biggest pension fund in Malaysia, the EPF will not appoint a different management team for managing the new scheme.
The current management team will manage the Simpanan Shariah and there will also be a shariah governance framework, comprising the Shariah Advisory Committee and shariah compliance functions as may be prescribed by the Board, to ensure all operations and investment aspects of the Simpanan Shariah are managed in accordance with shariah principles. – BERNAMA