( 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).
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)