KUALA LUMPUR: Effective August, Employees Provident Fund (EPF) members will be allowed to buy only quality funds with consistent returns over a period of time in a bid to safeguard their investments in unit trusts.
At the same time, investment by members into funds with a foreign exposure would be reinstated but with a limit of up to 30%.
Federation of Investment Managers Malaysia (FIMM) president Tunku Ya’acob Tunku Abdullah said yesterday that EPF had agreed with the federation to allow their members to buy performing funds – those that have higher consistent returns for at least three years to further instill trust and confidence in unit trust investment.
This means that funds with less than three-year track record and newly launched ones will not be sold to EPF depositors.
The reinstatement of funds with foreign exposure would enable EPF members to enhance their investment options and diversify their risk portfolio, he added.
In early 2005, Bank Negara liberalise the overseas investment rules whereby EPF members were allowed to purchase without any limits funds with foreign exposure.
Then in 2007, EPF disallowed it, stating among others, it needed further study on the impact of such funds performance.
To ensure consistent performing funds, FIMM would introduce a performance focus methodology to measure funds under the EPF Members Investment Scheme annually.
“Funds that consistently have higher performance relative to its peers in the same category will be made available for sale to EPF members. Those that generate returns but not as high as their peers and do not meet a certain criteria, will be suspended for sale.
“These funds can be re-instated when they eventually meet the criteria. The evaluation methodology for sale of funds as well as those with foreign exposure are expected to be implemented in August,” he said at a press briefing.
Tunku Ya’acob said currently more than 300 funds under the scheme would undergo the evaluation process and the final list would be announced in due course.
Out of this total, he expected 5% of the funds to be suspended for not meeting the relevant criteria, but would qualify if their performance improved.
A person familiar with the matter told StarBizWeek that successful funds would be listed on FIMM and EPF’s websites. “These performing funds would have their names on the websites but will not be given ratings as FIMM and EPF are not in a position to do so.
“Suffice to say that these funds have been evaluated with the right methodology. EPF members will benefit from this move,” the person noted.
FIMM executive director Lee Siew Hoong said the methodology would evaluate relative performance on funds among peers with at least three years of track record in line with international accepted practices.
A period of three years was deemed to be the minimum period to evaluate the longer- term performance of the fund as unit trust investment was for the medium to long term, he noted.
Lee said funds must meet certain criteria including consistency and risk-adjusted return performance before they are allowed to be offered to EPF members.
The methodology uses an international research house rating data to calculate the criteria, he said.
Source: The Star
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