#Malaysia’s securities regulator has proposed establishing a fund to invest in the country’s Islamic finance funds and make them more attractive to institutional and foreign investors. The proposed fund is part of an Islamic fund and wealth management blueprint launched on Thursday. It would invest in multi-currency Islamic investment products managed by Malaysian-based asset managers. The fund could address challenges that Islamic funds have faced so far. Few Malaysian-managed funds are offered overseas but this is starting to change. CIMB Islamic Asset Management, for example, this week launched an Ireland-domiciled dollar-denominated sukuk fund. The Employees Provident Fund is launching a RM111.45 billion shariah-compliant retirement fund this month, which could serve as a boon to asset managers in the field.
CEO Shahril Ridza Ridzuan announced that the Employees Provident Fund aims to open the Shariah-compliant plan in January 2017 and is targeting an initial size of as much as 100 billion ringgit ($26 billion). There’s strong demand and 1.5 million of its 6.7 million members should switch in the first year. EPF has a minimum guaranteed annual payout of 2.5 percent. The Islamic fund won’t have a minimum dividend as they can’t be guaranteed under Koranic rules.
The Employees Provident Fund (EPF) plans to launch its first fully syariah-compliant fund by January 2017 with an initial fund size of up to RM120bil. Those who are interested in converting their savings to full shariah compliance status can do so on a first come first serve basis, EPF deputy chief executive officer of investments Datuk Mohamad Nasir Ab Latif said. The pension fund’s total investment assets grew to RM667.56bil as at September last year. Its total income for the first nine months of last year amounted to RM31.58bil. 51% of the EPF’s portfolio mix comprise of fixed income investments, while 43% is from equities. The remainder is for real estate and infrastructure as well as other investments.
The Employees Provident Fund (EPF) stressed it has the right to vote on the proposed merger between RHB Capital Bhd (RHBCap) and CIMB Group Holdings Bhd as it is the major shareholders of both entities. The pension fund’s chief executive officer Datuk Shahril Ridza Ridzuan reminded that it has the interests of 14 million members at stake. Some within the board of RHBCap were against allowing the pension fund to vote in the merger deal. The dissented parties thought that it was “inconceivable” that the EPF had not been engaged in prior discussions relating to the proposed merger between RHBCap and CIMB in which the pension fund holds a 41.34% and 14.46% stake respectively.
Because of sweeping government reforms in their pension system, Malasians are most likely to allocate part of their retirement contributions to Islamic investments. Since the Employees Provident Fund (EPF) has limits in investing syariah-compliant areas, the new, voluntary Private Retirement Scheme (PRS) is meant to supplement it. Thus, contributors will be able to allocate money to a wide range of products offered by private-sector fund management firms including syariah-compliant investment. The result is a potential rise in the amount of money going into Islamic instruments.