Tuesday, December 18, 2012

EPF: The way it announces numbers has to change

No wonder MTUC asks for higher dividend because he is reading the headlines. See the report below. The guy is probably being mis-informed

KUALA LUMPUR: The Malaysian Trades Union Congress (MTUC) has called on the Employees Provident Fund (EPF) to declare a higher dividend this year because of its increased investment income.

The EPF recently announced that its investment income soared to RM7.02bil in the third quarter of this year ending Sept 30.
MTUC vice-president A. Balasubramaniam told Bernama on Tuesday that in view of this, it was only appropriate for the fund to declare a higher dividend.
EPF declared a six percent dividend for 2011.
Balasubramaniam said the majority of the 10 milllion private sector workers were looking forward to a better dividend from the fund as it was the only source of savings for them. - Bernama
The thing is if we use absolute numbers to announce the performance of the fund, chances are it will increase. This is because the fund size increased as well. Over time, EPF's fund size would probably increase (by quite a lot) rather than decrease. This is because total number of contributors increase as well as its amount each contributor gives increase as well. What EPF actually needs to report is Return on Investments or Return on Assets - not the absolute number in terms of performance. EPF's fund size is having net increase of RM1 to RM1.5 billion a month! Its absolute return should increase as well...What's more important is the performance per ringgit of fund contributed.

See the announcement below (can you track what's wrong):

EPF earns RM7.02bil in investment income in third quarter ending Sept 30

KUALA LUMPUR: The Employees Provident Fund (EPF) Thursday announced a 66% year-on-year income growth for its loans and bonds portfolio to RM3.06bil for the third quarter ended Sept 30, 2012 vis-a-vis RM1.85bil in the same period in 2011.
EPF said it earned RM7.02bil in investment income for the quarter under review, up 3.24% over RM6.8bil last year.
Chief Executive Officer Tan Sri Azlan Zainol said loans and bonds generated exceptional one-off returns due to a number of tactical capital market transactions, thus outperforming other portfolios in the same period. - Bernama
Not asking much. EPF is representing almost everyone in the labor force (except for public servants and self-employed) - I think we deserve a bit more in terms of reporting.

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