Picking a fund is like picking a stock - one will need to identify the investment mindset and objectives of the fund manager - how much they have consistently beat the market and can they still do it in future. That's a hard call. Then the fees. Are you willing to pay for the additional fees while in EPF, you are basically not paying the extras.
Back to EPF - EPF is a the largest fund among all the unit trusts. In fact it is not a unit trusts. It is a provident fund - i.e. taking care of our old age.The recent attack by some opposition members may not be that wrong as it has invested into FGV and it looks like it was supporting the share price. (However, statement like EPF has lost few hundreds of millions investing in FGV is a misguided statement as there are losses and there are gains in investments - and anyway it is losses in the books, unrealised) I in fact have mentioned of my unhappiness with regards to the investment, but one must know that EPF is a very large fund. That is a very small portion of its investment. Unlike me, where I can be very picky with my investment decisions, EPF can still be picky but if it is too picky, it has less places to invests in. (But that doesn't mean it can simply invest anywhere, which to a large extent it is not so.)
|Investment assets of EPF have been growing very fast|
If I am the fund manager of a fund this size, I will have problem allocating these assets. Hence, managing it and have a decent return of 6% for example last year is quite a good feat.
The only good thing for EPF's fund managers are that they do not have to source for contributions (i.e. growing their fund size) unlike the other unit trusts fund managers which have to worry over fund size growth vs withdrawal, anytime. That is a great advantage that EPF has - where it can actually figure out the future withdrawals while other open-ended unit trusts can't really do that. As a result, unit trusts have to park a larger portion of their money in more liquid assets.
|Picked from the Chairman's statement in Annual Report 2011|
|2001 vs 2011 allocation from EPF's investments|
From above, you can see that the contribution from equity is now constituting a substantial percentage of its income. While it still needs to put some of the money in MGS and money market, this obviously is reducing.
While it is now putting a lot of money in equity, the return that it has gotten is not too shabby against many of the funds.
Last year itself, return from equity investment was 11% which was even better than many of the funds. Now, with this kind of investment returns, I do not really have to think of diversifying my investments into unit trusts.
You can say that the large holdings EPF has in a lot of the companies it invests into, it may be able to largely control the share price - well, that's another argument but most unit trusts have to put their money in the Malaysian bond or equity market anyway.
And the ones that went overseas i.e. South East Asia or East Asia actually largely underperformed in the last few years.
Based on the chart on the left, many more people have taken their money out from EPF recently. Great for the funds industry as it needs that. Obviously, I was approached as well but I am staying put with EPF. If any of the fund can outperform EPF by say 1% - 2%, or maybe even slightly more, I will just say - forget about the trouble.
I generally think that EPF has done quite well for the larger portion of the public which consists of more than 13 million contributors although once a while we may make some comments like the ones with FGV.
NO, I am not being paid by EPF to write this article, but I think the guys need some pat on their back to do what they have done. But of course, if I am given the opportunity to withdraw the money for me to invests myself, I would gladly welcome it.