I was having dinner with the branch manager of a local unit trust company last Wednesday when I asked her why certain funds cannot be purchased with an investor’s EPF savings. After all, EPF had been allowing its members to withdraw from their Account One to invest in unit trust funds but I’ve seen just too many new funds that just could not get the green light from EPF.
“It’s just not us alone,” said the branch manager, add that all the fund managers in Malaysia are now facing the same difficulty with EPF.
“The funds affected are the global or offshore funds where the investors’ money is placed in global markets. EPF is just not approving the use of their members’ savings to invest there anymore. You can still buy these funds with cash but not EPF money,” she said.
According to her, EPF decided on this action recently because they themselves are players in offshore markets. They see competition from unit trust companies who are chasing after the same investors who wish to transfer part of their savings into global investments.
With new global funds no longer enjoying this opportunity, what about existing globals funds that already have EPF approval? She wasn’t sure of the direction that EPF would take but her advice to me was, if EPF members still want to place their money there, they had better do it soon before even this approval was withdrawn.
I hadn’t realised how prophetic her words were until I read the local newspapers two days later. In a news report in The Star, the Federation of Malaysian Unit Trust Management (FMUTM) said they would appeal to the Finance Ministry over the EPF’s ruling – apparently made on 19 Jun – to stop its members from investing in overseas unit trusts.
The EPF ruling affects offshore funds and does not apply to funds that are fully focused in the domestic market.
More omnimous was the advice from the EPF to the local fund managers that they should also stop selling new units or investments for all offshore unit trust products that the EPF had approved earlier. It’s an about-turn of a green light given by EPF for its members to invest part of their savings in overseas unit trust funds two years ago.
The FMUTM president, Tunku Ya’acob Tunku Abdullah, said the ruling was made on the view that offshore funds carried higher risks, including currency and geopolitical risks.
“While there is no denying that offshore funds do have additional risks, investors have over the last two years understood the features of offshore investing and are willing to place some money to increase wealth through portfolio diversification,” he said.
“This ruling will invariably restrict some of their investment opportunities. We will appeal to the Finance Ministry for a review,” he added.
Meanwhile, it was reported in today’s New Straits Times that Second Finance Minister Tan Sri Nor Mohamed Yakcop said that “every decision of the government or EPF are based on prudence, reasonable returns and minimal risk so as to ensure that EPF members don’t suffer losses on their contributions.
He said that the ministry will need to consider the FMUTM’s appeal in the context of whether the investments in unit trusts abroad are safe and are in line with national interests. “We need to express our confidence in investment opportunities within our country.”
I shall leave it to you to read in between the lines and come to a conclusion yourself.