EPF 2023 dividend, Conventional 5.5%, Shariah 5.4%

[sprinter1970]

Historical performance:
2022: Conventional 5.35%; Shariah 4.75%
2021: Coventional 6.1%; Shariah 5.65%

 

[robruss102]

@sprinter1970 To those who are disappointed at the %, let me repost what I mentioned a few days ago:

EPF dividends actually do not 100% correlate with actual income generated and asset valuations. Have a look at past years, look at their asset allocations, look at how much income they've generated for the year, and divide that by AUM for that year (net expenses). They don't payout everything. Why? They are not an actual fund.

They smoothen out the income over years to manage income/valuation volatility, because
- there are no "unit prices" in epf. Hence, your capital is "guaranteed/protected"
- they want to reduce the shock in market downturn. In years with covid, GFC with significant downturns, the underlying asset classes produced losses. But they used retained earnings from previous years to pay out a consistent dividend each year

So EPF always needs to retain some portion of income for bad years when markets are down, etc. So they can always payout every year. They'll need to keep more profits this time because of
1. Uncertain economic propsects
2. Depreciating ringgit, coupled with the gov request to epf to invest in Malaysia more (which imo means lower quality assets and lower returns in the future)

 

[solo81]

@robruss102 That sounds exactly like how ASB works too except with their unit preservation fund, but with the disadvantage that EPF doesn't have a different class of shareholders to gouge through sales charges and expense ratios.

It doesn't seem surprising that they had to lower the distribution given that these fucktards started off 2023 with a RM34 billion hole in their reserves.

 

[jfarmer]

@sprinter1970 some perspective :

EPF does not charge a sales fee, admin fee, maintenance/management fee

EPF is for retirement purposes, i.e long term (20-30 yrs). Not for a quick buck. That you need to dabble in high risk equities.

EPF objective has always been moderate, consistent growth. Never to give outstanding returns to investor(wrong term, should be retirees)

EPF, under law, has to give a minimum of 2.5% per anum. This is a requirement.

EPF definitely made more than 5.5%. I reckon around 6.5-7%. probably used 0.5%? for overhead cost, 0.5 to 1 % retained profits to smooth out years that underperform. Like a contingency fund

side note :

ASB declared 4.25 + 1 % in Dec 2023. EPF 5.5%

This means, since 2020, EPF has out performed ASB, 4 times in a row

 

[russman]

@jfarmer Overhead cost is definitely not 0.5%, you have to account for the massive AUM of PEF, more like 0.1% to 0.2%

 

[jfarmer]

@russman yeah true. forgotten bout the sheer size of its AUM.

 

[russman]

@jfarmer Which is why I have a hunch that they used conventional funds to increase dividend of syariah

 

[jfarmer]

@russman suspect also. but honestly have no way to prove it, unless got insider wiling to speak out

 

[russman]

@jfarmer I was considering contribute quite a lot into epf say bond allocation, but after this I am kinda reluctant to put more, guess I’ll just stick it in us bonds instead

 

[jfarmer]

@russman to me, you should just max out your tax bracket 4k (if employer hasn't already). I think own cash, better self invest elsewhere for better ROI.

leave EPF for retirement. at least even if you f/up for normal investment, you have this safety net.

of course, don't la do withdrawal simply for ibestari etc...

 

[russman]

@jfarmer I got a lot of overseas investment already, like 70% of portfolio, which is why I contribute into epf, it’s like a bond for me, but if it keeps getting politicised, I will not contribute more and just wait for it to compound to 1 million and spend the dividends

 

[jfarmer]

@russman then if bonds is your game, buy directly via FSMOne. they got oddlot/small lot bonds. govt & private. 5k minimum i think

 

[russman]

@jfarmer Tried those before, too illiquid and returns don’t beat EPF for now, in the future maybe can consider

 

[georgiew]

@sprinter1970 2023 headline inflation was 2.3%, which means real returns from EPF dividend is 3%, higher than the target of 2% above inflation.

https://www.nst.com.my/business/eco...-inflation-rate-remained-15-pct-dec-2023-dosm

 

[amanda88]

@georgiew You forget RM depreciation at %3 per annum. So it mostly break even.

 

[christianinchrist]

@amanda88 That’s not how economics/finance works. You can’t just add inflation and depreciation - it doesn’t make sense.

If you are spending in RM, all that matters is inflation. Everything else e.g. imported inflation would factor into CPI inflation to determine how your purchasing power has changed. You don’t need to top-up for RM depreciation.

If you are spending in USD (or some other foreign currency) on the other hand, you shouldn’t consider the Malaysia inflation portion at all. All that matters is RM depreciation and the other country’s inflation, not Malaysia’s.

Since this is a personal finance sub, I think it’s worth being clear about these things since some people might mistakenly take your comment as being the standard for how we benchmark returns.

 

[scarletrozes]

@christianinchrist Thank you for the knowledgeable explanation. I learned something today.

 

[russman]

@christianinchrist But the thing is, a lot of stuff is imported, so the depreciation does matter, and by a lot

 

[christianinchrist]

@russman Sort of - but the next question would be “if it’s a lot, then how much exactly” and from the perspective of a everyday person, the only thing that matters is whether they are actually spending more now. And that is entirely determined by inflation, not ringgit depreciation.

Prices don’t automatically go up just because the ringgit depreciates, and if they do, it would show up in the ultimate measure of CPI inflation, so most people should just look at that rather than draw up weird methods to “top up” inflation with depreciation that they thought off on the spot rather than being based on any normal financial principles.

My original comment is meant to clarify why we can’t add inflation and depreciation when benchmarking returns, not meant to open up a discussion on whether ringgit depreciation is good or bad. You bring up valid concerns on how we do have to import things - with ringgit depreciation there are winners and losers. I imagine if you’re running a business with high import content or have kids overseas, ringgit depreciation hurts a lot more. But it’s difficult to say the average person is definitely worse off right now because of it - maybe they are, if in the future that depreciation leads to actual realised higher inflation or some other issues.

 

[neobondjames]

@christianinchrist Countries are interconnected. We import almost everything. Cars, electronics and use foreign software.