EPF To Invest £1bil (RM4.88bil)Properties In UK

( A shopping spree of almost RM5b in the UK and Europe. Well it may be buyers’ market for now but could we get that kind of annual return of 6% to 7% later. Professional colleagues who are more conversant with the property market in the UK and Europe have their doubts, while experience of Lehman Brothers, Goldmann Sach et al must quickly remind us of the kind of risk-return profile we are courting. Besides, it’s fund outflow again. Regardless, somebody is going to make a fortune in upfront arrangers’ fees – whether it is EPF’s eventual profit or loss. How lucky).

By IZWAN IDRIS and JOSHUA FOONG

The Employees Provident Fund (EPF) will invest £1bil (RM4.88bil) in properties in the UK, the pension fund said in a statement yesterday.

“The investments would be for long-term with expected annual yield of 6% to 7%,’’ the statement said.

The fund did not identified any specific property.

The statement came in response to a UK news report published on Sunday that said the EPF had appointed ING Real Estate Investment and Deutsche Bank’s property investment arm RREEF to manage the £1bil investment.

They will each invest £500mil in European property markets, focusing on the UK.

Several significant stakeholders urged the EPF to be careful in handling the venture.

MTUC president Syed Shahir Syed Mohamud said such a big move by the fund would have already gone through a deliberate process and consultations with experts.

“However, acting cautiously will also see slower or smaller returns with less dividends annually.”

Fomca secretary-general Muhd Sha’ani Abdullah said EPF must be held accountable with the venture, adding that deals should not be made secretly.

“Every deal should be immediately announced. Huge investments usually means bigger risks.

“We have seen how highly successful organisations like Lehman Brothers had collapsed due to mismanagement. EPF must be very transparent and careful,” he added.

As at March 31, EPF’s total fund size was reported to be at RM402bil, most of which are invested in local bonds and equities.

Currently, less than 1% of EPF’s total accumulated fund is invested in properties, well below the fund’s strategic asset allocation target of 5% for properties.

“The EPF is desirous to bring this percentage up,’’ EPF said in the statement. But there are valid concern about “crowding out” the market if the EPF uses its massive fund to snap up local assets.

Such diversification into foreign asset play would also allow the fund to better manage its risk-return profile.

In April, EPF’s chairman Tan Sri Samsudin Osman said the pension fund needed to invest more overseas to boost returns and keep annual dividend above the guaranteed 2.5% rate.

It was reported that the EPF had set aside RM10bil for investment in overseas equities and global bonds.

EPF said the fund strictly adheres to its strategic asset allocati on designed to maintain consistent returns in the long run within tolerable risks limits for each asset classes.

“Even with (the £1bil) investment in the UK, the percentage is still well below the EPF’s strategic asset allocation for properties,’’ EPF said.

The EPF said it had zeroed in on the UK property market because that is one of the largest property market in the world backed by a strong Lands Law protecting landlords.

“The stable and highly liquid UK property market underlies the rational behind the move,’’ it said.

The EPF said that although it had a policy to pursue overseas investments, the fund is also “aggressively exploring the market” in Malaysia.

Among local properties owned by EPF includes that Sogo Building, Wisma KFC, MAS training Centre, Giant-operated supermarket outlets and CIMB branches.

Source : thestar.com.my (Posted on: 2010-08-31 18:47:32)

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4 thoughts on “EPF To Invest £1bil (RM4.88bil)Properties In UK

  1. The problem Black Arrow, the people making decisions and executing this tie up with ING are probably scratching each others back, as we speak.

    No secret, the two big western economies, UK and US, are going through a period of consolidation – at best, painful growth(if any) with maximum pump priming and at worst, both economies, Stateside more likely, will experience a similar ‘lost decade'(going on two) as what Japan has gone through before.

    IMO, I don’t agree with any venture to park EPF money abroad right now. I foresee prices going through a downward spiral near future (1-2 year period) as more distress properties come to head – the bottom of the property bubble is still ways off.

    That said, the high end of UK’s property market, re: London’s Grade A investment of real estate have been holding up its valuation but supply of such Grade A investment has been limited, hence its valuation.

    Question, would EPF be in a bidding war with those with petrodollars ?

    Currently, only Abu Dhabi, Kuwait and the Saudi boys are just about the only active players seeking out such investment in the city. Why go abroad and seek out return of 6-7% percent when even our local/regional bourse can possibly ensure better returns ?
    I give just one example ; when Robert Quok effectively transferred his M’sian plantation interest in Perlis Plant into his nephew’s listed entity re: Wilmar, on the S’pore Stock Exchange, the share price of Wilmar on the day the deal was struck was some SD$0.98 cents but fast forward to present, Wilmar closed at SD$6.50 cents – a gain of over 600% in just over two years – mana mau cari duit untung macam ini ?

    The point I am trying to stress, avid market watchers/players can easily exceed returns of 10% (close one eye) with resource invested in KLSE/regional bourse. Not to sound off my horn but it has been done before, time after time, year in year out – so why is EPF taking our money 8,000 miles away from base to the UK for a ‘speculative’ return of 6%-7% (no guarantee, as with any investment) ???

    My only hope, the lawyers working this deal (perhaps) could provide/include certain restrictions/caveat base on performance to withhold *fees to be paid when concluding any deal. This is where a sound advocate in the specialist field, “law of contracts” would come in handy.

    * One pertinent point to remember, Nasir Razak’s Bank Bumi earned fees in excess of RM$300 million for their part in stitching up all of Sime Darby’s associates and subsidiaries into one big colossal.

    If I had my way, the fees shouldn’t have been paid one lump sum(many angles/reasons can be cited and worded into the final contract) but all too late now with Sime Darby shareholders getting the shorter end of the stick.

    Let’s not have a repeat should EPF proceed with this investment(foolhardy in my mind) with ING advising, really.

  2. You are right, Casper but as we the rakyat don’t have a say on how EPF are to invest, we can only hope for the best. I too am not optimistic about this venture.

  3. Maybe EPF needed a holiday house in london for their staff. So to ensure that, they needed to invest in “something” in london. Otherwise how to justify to the bosses?

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