Business

Friday July 22, 2011

RM80b target for retirement fund

By JEEVA ARULAMPALAM
jeeva@thestar.com.my


KWAP CEO says the fund grows by about RM9bil annually

KUALA LUMPUR: Kumpulan Wang Persaraan (KWAP), also known as Retirement Fund Inc, hopes to increase its fund size to RM80bil from RM70.52bil in view of higher gross investment income as well as the Federal Government and employers' contributions.

“We grow by about RM9bil annually so we hope to reach about RM80bil by the end of this year,” KWAP chief executive officer Datuk Azian Mohd Noh told reporters yesterday after the release of the fund's 2010 financial results.

The fund increased by 14.67% or RM9bil to RM70.52bil from RM61.50bil in 2009 due to gross investment income of RM4.62bil and RM4.18bil from the Federal Government and employers' contributions.

“For 2010, KWAP's realised gross investment income of RM4.62bil grew by 43% or RM1.38bil from RM3.24bil posted a year ago. This translates into a gross return on investment (ROI) of 7.07%,” Finance Minister 2 Datuk Seri Ahmad Husni Mohamad Hanadzlah said in his speech at the event.

The gross investment income saw the bulk of its contributions, or 53%, coming from equities. Fixed income assets, namely loans and private debt securities, Malaysian Government Securities and money market instruments contributed RM0.90bil, RM0.84bil and RM0.39bil respectively.

Collectively, fixed income investments contributed 46% to gross investment income while the balance 1% came from alternative investments.

However, KWAP's net investment income was down RM0.85bil to RM4.85bil in 2010, after incorporating the writeback of allowance for diminution in value from 2009.

“The writeback was because of the equity markets. We over-provided for some stocks that did not do well in the previous year,” KWAP chief executive officer Datuk Azian Mohd Noh told reporters later.

Aside from its active investments in the domestic capital market, KWAP has started to invest abroad as of last year in both equity and real estate markets.

The fund had subscribed to AIA Group Ltd shares during its initial public offering on the Hong Kong Stock Exchange.

As for its foray into the international property market last year, the fund bought a commercial building, known as the 737 Bourke Street, in Melbourne's central business district for A$113mil (RM365.13mil) and it also entered a joint venture with the Employees Provident Fund to buy three buildings in London for 500mil (RM2.49bil).

“From our asset allocation, about 90% is invested domestically while the balance is invested abroad. From the 10% invested abroad, 2% will be for fixed income and another 2% is for equity markets, while 3% goes to alternative investments and another 3% for real estate investments,” said Azian.

She added that further real estate investments made overseas would be done carefully as the fund needed to consider the potential translation loss due to currency changes.

“As for equity stocks listed abroad, we will focus on dividend yielding stocks,” she said.

KWAP was established in March 2007 under the Retirement Fund Act 2007 (Act 662) replacing the repealed Pensions Trust Fund Act 1991 (Act 454).

The Act was enacted to assist the Federal Government in funding its pension liability and the Pensions Trust Fund was established on June 1, 1991 with a launching grant of RM500mil from the Federal Government.

When KWAP was incorporated, all powers, functions, activities, assets and liabilities of the Pensions Trust Fund were taken over in totality by KWAP.

The Federal Government contributes 5% of the total annual budgeted emolument of government employees while statutory bodies, local authorities, and agencies contribute 17.5% of the basic salaries of their pensionable employees to KWAP on a monthly basis.

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