EPF share investments: An interesting question


Recently a news report revealed that fund managers were in agreement that it is unhealthy for the Employees Provident Fund (EPF) to dominate 50 per cent of the daily trading on the local stock market. This raises an interesting question.

Najib had said the EPF’s dominance in Bursa is “not healthy” for the local stock market or for the EPF. This is cited as one of the reasons for allowing the EPF to invest up to 10 per cent abroad.

The EPF’s total funds amount to RM370 billion with a quarter invested in Bursa. The total daily value of transactions on Bursa can surpass RM1 billion per day. Today, for instance, it was RM1.03 billion.

And now the interesting question:

Is there a commission on the EPF’s transactions in Bursa? And if so, how much do they add up to per day and who receives them?

Let’s try and do some rough calculations to arrive at a ball-park figure:

How much was the total value of transactions on Bursa last year? From the brokers’ trading summary for December 2009, we can see the year-to-date total value of Bursa transactions in 2009 was RM605.6 billion.

Now roughly 50 per cent – i.e. RM302.8 billion – we are told, was accounted for by the EPF.

Assuming a brokers’ commission rate of 0.25 per cent, that would give us RM757 million in commissions.

If these assumptions are fairly close to reality, that’s a lot of money going to brokers in commissions out of workers’ savings in the EPF. The total commissions could be even more than what some banks would make in profits. For example, EON Capital made a profit of RM341 million for 2009, it was revealed to Bursa.

What do you think? I invite corrections to these assumptions or more accurate figures if you have them. The EPF should make public how much it paid out in commissions for 2009. Contributors have the right to know.

The Star report in full:

Tuesday April 6, 2010
Fund managers echo PM view on EPF trades

[email protected]

PETALING JAYA: Fund managers agree that it is unhealthy for the Employees Provident Fund (EPF) to dominate 50% of the daily trading on Bursa Malaysia.

During his speech at Invest Malaysia 2010 last Tuesday, Prime Minister Datuk Seri Najib Razak had said the EPF’s dominance of the local equity market, with up to 50% of daily trading volume, was “not healthy” for the market or for the pension fund.

“It is no use being the biggest fish in a small pond where you can be attacked by everyone,” said a research head of a local firm.

“When this happens, your strategy is very limited and you cannot liquidate easily. It is difficult to get out, as you always need to be holding the baby. The result is sub-par performance.

“That is why it is very important for the Government to sell down its stakes in the government-linked companies (GLCs) to boost liquidity in the market,” he said.

He cited the example of Lembaga Tabung Haji, which at RM23bil, was less than a 10th the EPF’s size, and was thus nimbler and able to exit stocks easier.

Currently, the EPF has a total fund size of RM370bil and about a quarter of this is invested in the local stock market.

Meanwhile, Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said he was well aware of the challenges facing the market and was continually working with the authorities, index providers and market participants on improving free float and liquidity in the market.

“Having said that, we agree that having one particular type of investor dominating the market is not healthy for the market over the long term.

“We want to attract a diverse set of investors into our market for sustainable growth. Therefore, our current initiatives are addressing the needs and demands of a wide spectrum of investors,” Yusli said.

He said investors should also shift their mindset and look at investing in as many Bursa-listed companies as possible.

“True to the wise saying of not putting all the eggs in one basket, investors should diversify their investment strategy and not concentrate on one or a small number of stocks as this scenario is hampering liquidity,” Yusli said.

At Invest Malaysia, Najib also said the EPF would be allowed to invest more assets overseas, both diversifying its portfolio and creating more room domestically for new participants.

EPF chief executive officer Tan Sri Azlan Zainol said the pension fund planned to increase its overseas investments to 10% of the fund size over the next one or two years.

EPF declared a dividend of 5.65% for last year. This was on the back of an improved total net income of RM19.63bil, up 34.82% from RM14.26bil in 2008.

It could possibly have declared better dividends had it invested more abroad, as that would have given it more flexibility in its movements.

“It is a good thing that the EPF is going abroad. I don’t really think there is a problem of risk as the overseas exposure is small relative to its fund size and present exposure,” said a head of fixed income from an insurance fund. “Going from 6% to 10% isn’t much. So it is not increasing risk, rather a diversification and reduction of risk.”

While certain quarters said EPF was seen as the buyer of last resort for the Government’s equity stakes in GLCs, the fund manager disagreed.

“The EPF is on the ball. They know what they are doing. They will not simply take something without evaluating it first,” he said.

EPF public relations general manager Nik Affendi Jaafar said the EPF competed against other funds whenever a block of shares was offered to the market.

“In most cases, the EPF is not able to purchase shares in the quantities that we desire,” he said.

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Because of its diverse nature, service orientation, and human-resource intensiveness, a vibrant financial industry also creates jobs in secretarial firms, fund management firms, legal and compliance industry, education and training, performance verification and certification, more banking and trust jobs, foreign exchange jobs, including pure additions to demand for messengers, librarians, janitors, newspaper deliveries, drivers, editors, convention facilities, physical security, health, insurance, technical consulting, employment agencies, etc. Financial industry creates a full range of high and low end jobs. I’ve seen closely how it works in US, UK, HK, and other places. We don’t know what we have missed. There are… Read more »


Thank you, Mr. Cheah, for your most informative input.

Taiwan and Korea got ahead of us not merely with the 10-Billion a year advantage, but they actively explore ways to tap on the brains of the people.

Over here it’s the reverse.

The government does nothing but suppressed (and still suppresses) the brains of the people so much so that they people in this country is getting dumber and dumber by the day.

It’s not only happening in the financial sector but in all sectors.

Essentially in Malaysia everyday we see dummy leading other dummies doing dumb things.


The RM10-20bil I mentioned is an oversimplified example.

More accurately, 2% more a year over 53 years of “truer independence” and liberty would have meant 2.86x, or nearly 3x our current income. (1.02^53)

Imagine a family with RM3k a month making RM9K a month instead, and another family with RM10k a month making RM30k a month instead.

That is what we miss and yet do not know as a country.

Gerakan K


I have no intention to challenge your theory. But it is outright too academic and have no practical value.

Imagine the average income of curry puff (“karipap mini”) seller which is roughly RM1000 per month (this is real figure because I ask the real person).

How that income can be increased even if there are minimal corruption, leakage, elimination of red tape, or even PR takeover as federal government ???

Is it the same way as multiplying with the FIGURE you have supplied ???


I illustrate with a hypothetical example of a Taiwanese noodle vendor. A Taiwanese noodle vendor is richer than a Malaysian noodle vendor because of several reasons. (Let’s ignore the further wealth from his property price appreciation over his life time.) First, he can charge more in a wealthier economy because the customers can pay more (whether by being able to afford more visits, or afford higher prices for better ingredients and premium shop environment). Second, their ingredients are cheaper compared to their wealth level because of many reasons. (a) lower import cost for material because of lower tariff and lack… Read more »


A two-teacher family income easily exceeds RM3000 per month. A programmer and sales manager family income can reach RM10,000.

I’ve once heard an immigration officer sympathetically asking an applicant who reported RM2,000 income “how can any family live on this salary?” Imagine that from a young civil servant.

Several government-sponsored MBA graduates in the past year I’ve heard of expected starting salary of RM3000 per month.

It’s not quite hypothetical.


Anil, There’s a lot more to it than commission. By wielding near monopoly power to distribute brokerage business, and therefore RM 3/4 billion of commission around, the EPF, a tool of a very centralized BN, has essentially muffled the financial industry. The financial industry functions much like the press. The freer it is, the more it checks government power. A competitive financial industry would have been a gift and an independent watch dog on economic policy that raise early alarm bells, and tie the hands of arrogant governments. Without that watch dog with a real bite, Malaysia’s BN can muddle… Read more »


Don’t talk about the investment by EPF a lone, you should pounder this … how they can make money out of so call good investment policy…
How money stock broker able to penetrate EPF, how many re miser’s able to get the business…only a selected few which is with … close associations of the ………?
Then, you know how the huge commission paid out ….whoever get the business is making tons of money out of nothing…not a difficult job right. money available, you just wait for instructions …. you count the money.


Another question that arises is how much does the EPF make in such hectic buying and selling? Does it buy when low and sell when high? This would mean EPF is making a ton of money trading in local stocks. Unless it is actually trading at a loss (especially after factoring in the trading commission). EPF should come up with a table to explain their position after every trade – and so should their government linked trading partners. I suspect it is at a loss or no gain (at best) but again the question would be how much in commission… Read more »


The government should enact law that requires EPF to inform Bursa at least 1 week before it disposes or buys any stock it holds, whether its substantial or not. After all, its people’s money they are using. So its only fair to inform the public of their investments. Then Bursa will then make their necessary announcements on their website of EPF’s intention to sell. This is necessary as it is a very big player in the market with an unfair advantage of purchasing power. Otherwise, the market will be too volatile having one player that is too powerful. Or better… Read more »


If 50 per cent were deducted from the total, what does that tell you about a day’s daily trading?


A few years ago, when the stock market was in its doldrums, a few public funds were playing monkey with the people’s money by selling chunks of stocks to each other in these “phantom” transactions. This was to create a false impression of an active stock market; … Same question : who were the ones making a killing in trading commission? IIANM LKS brought it up, and even had a list of such suspect transactions showing the movement to and fro between public funds. To this day, they (Bursa and SC) have remained silent.


Those who can should withdrawal their EPF monies and park it in Chinese YUAN or even Aussie Dollar, but not USA $. RM can only go in one direction, ie South.


An interesting question is WHO is the Broker for EPF? This should be made public, after all, it is our money that EPF is using to pay the commission. EPF has just too much of power. Look what happened to KNM last week, because EPF sold chunks of shares in it recently, the share dropped substantially last week. In my opinion, it was not because of the failed proposed takeover that caused a panic, it was because EPF had sold huge chunks of it that caused many to panic. So, a lot of people lost berpuluh thousands. This is so… Read more »


Hmm.. that’s food for thought. Thanks Anil for challenging our simple minds!
I would think that EPF (perhaps) uses a company, and this company (could be) owned by the usual suspects…. (come on, we all know how these things work – it’s a Malaysia Boleh trademark).

Leenam Yon

What is so wrong when paying commissions to stock brokers for the purchase and sale of shares.
It is a cost of investing.
EPF’s share is large (50% as you say) because the Malaysian investing public is small.


the calculations are little flawed. epf’s assets size per their website and from other sources suggests that it is around USD110bn / RM350bn to RM370bn. they invest up to 75% in malaysian government securities and bonds and only around 25% is invested in equity (listed and unlisted), property, private equity, etc. so in reality only around rm90bn is really invested in equities. commission at 0.25% will be about RM230mn. a big number no doubt but not when you compare that against the size of EPF. to those that say they are gambling with our money, please get your facts right,… Read more »

Concern EPF contributor

Nick, Please understand the mechanism of investing and check your figures first before accusing other people of making wild accusations. Your figure of RM90bil is the value of EPF share holdings as at 31/12/2009. It is not reflective of the amount/value of shares traded over the course of the year. To make this point clear to you, imagine you owned 2 houses on 1/1/2009 and over the course of the year, you bought another 5 houses and also sold 5 houses. On 31/12/2009, you still have 2 houses in your portfolio, same as the beginning of the year. Now the… Read more »


the numbers that i stated are from discussions with fund managers within epf and comments by their staff (junior & senior) made on international road shows done by epf. are these verifiable facts? seriously i don’t know? do u know for a fact its right or even wrong? in the absence of contrary evidence, u have no choice but to accept it until proven otherwise. if u want an independent audit to verify the numbers, then lets start a petition or something. if u can get enough people to sign up (which i’m sure alot will), EPF will have to… Read more »


First of all, you need to make sure that YOUR facts are right. “epf’s assets size per their website and from other sources suggests that it is around USD110bn / RM350bn to RM370bn.” Question: Are those figures verifiable ? In other words, has any outsider being permitted to carry out an independent audit on EPF’s balance sheet? If not, why not? If not, how do you know the figures are correct? “they invest up to 75% in malaysian government securities and bonds and only around 25% is invested in equity (listed and unlisted), property, private equity, etc.” Again, is any… Read more »


The UMNO/BN … may also have other plans for EPF and a few other public funds.

A team of … barons are asking for the highways including PLUS. Guess who gets to fund this daylight robbery?

After a few years, they might… dump the unprofitable concessionaires to the government.

Then, we’re screwed twice over.

semuanya OK kot

DAP has spelt out how the government can painlessly take over the highways, but the highwaymen pretend not to understand.

Concern EPF contributor

Anil, Your figure is just about right and I share your concern on the amount of commission paid. Another worrying point is that EPF are sometimes active day trader ie buy and sell on the same day. This is evident looking at the changes in major shareholdings on the Bursa website. Worse, they sometimes (appear to) sell at a loss in the open market after purchasing at higher prices off-market just one week earlier. I can’t see the rationale in this kind of trades when the Investment objective of EPF is long-term. As a fund manager managing the rakyat’s hard-earned… Read more »

Gerakan K

I don’t know much about EPF internal operation. But if I’m not mistaken, EPF is managed by our local banks’ top management. So, no worry at all. Any serious trouble happened to EPF will CHANGE the government. So BN will be very cautious.

Concern EPF contributor

Gerakan K, Sorry to say that you are dead wrong when you mentioned that EPF is managed by our local banks’ top management. EPF has an investment committee/board that decides on their trading objective, strategy, etc. They manage most of the funds themselves but they do outsource some of their funds to external fund managers to invest, Pheim Asset Management being one of the many. Anyway, looking at the result of the HS buy-election, there is likely to be a change in government anyway. (Any) hanky-panky in EPF’s operations and mismanagement of the rakyat’s hard-earned money will only accelerate the… Read more »


We all know that UMNO BN is perceived to be so corruptible that through the 52 years they have siphoned of billions of our money. Remember Bank Bumiputra. Do we have to wait for another billions of dollar EPF scandal before we start to change the government now. We must resolve now to do that and make sure the next GE see their downfall.


but we lost rm320b oilfield with single stroke of pen, which is more painful to hear.


If EPF were to cash out, what would be the actual value of the KLSE?

Understanding your aticle, EPF will never have a chance to cash out, but, to be the cash cow of the GLCs listed in the stock exchange?

Gerakan K, just understand the above article and cash out. Too risky, as we do not know actual value of the market. Without EPF, difficult.


Dear Anil, I am interested to know where that figure of “RM 370 Billion” comes from ? If it’s from the news reports, where does the media get the figure from ? Have EPF opened up their books for the media to check ? Or is it a hearsay – “Oh, EPF says they have RM 370 Billions in total” ? Like that RM 370 Billion figure, Anil, anything else from EPF is un-believe-able. They never tell us how much they lost in investments. They never tell us how much loss they absorbed from the “Amanah” that are opened for… Read more »


That figure came from the Star report reproduced in the post.

As I have expected. That RM 370 Billion is a make believe figure that no outsider has a chance to audit.

Plain Truth

Nothing wrong with your maths if your assumption on the 25 basis points commission figure is right.

Gosh! All these are absolutely shocking, both on the staggering quantum of the commissions paid out and also that one single fund management outfit can account for 50% of the entire market trading value.

Sounds to me like “money for the boys”.


Now the EPF has turned into a casino. So those who cannot visit the casino at Genting can do so now at the stock market…. the boys at the EPF… are gambling with the money of the contributors.