Proper investment policy, disclosure, governance and accountability should be mandated under the law for EPF’s near half a trillion ringgit funds
THE recent brouhaha over the Employees Provident Fund (EPF) financing a government-sponsored RM1.5bil housing scheme highlights several issues facing the nation’s premier retirement fund.
Considering that it is a major heavyweight, which manages almost RM470bil belonging to some 12 million members, it is important to ensure that the EPF does its job, and does it as well as it should.
Questions swirl around three main issues: The kind of projects that the EPF should finance and the risk they bear; the amount of government influence over what the EPF should do; and the level of transparency and accountability that the fund shows to its members.
Sadly, on all three counts, it shows serious deficiencies. Although it has improved in recent years, in terms of the quality of investments, it has in the past made some dubious investments which have never been fully explained.
In part this is due to substantial government influence over its operations, specifically, the Finance Minister, who not only appoints board members but also has substantial influence over them, the law requiring directors in most cases to be subservient to the Finance Minister.
Meantime, the way the EPF reports its results, and its investments and losses and gains, leaves much to be desired. It is impossible for a fund member or anyone else to independently verify the soundness of its investment decisions. There is no or little statutory requirement for appropriate standards of disclosure, governance and accountability.
Because of its huge size, approaching half a trillion ringgit (it should exceed that mark easily this year), a multitude of sins can be easily hidden in its massive books. That’s all the more reason for an eagle eye to be kept on it at all times.
The way to ensure that the EPF keeps on the straight and narrow is to mandate that unambiguously through an amendment to the EPF Act. That should start with clear definitions of directors’ qualifications, requiring them to be those who have impeccable integrity and have an unblemished and distinguished record of service in the finance, accounting and investment fields.
The current Act gives the power to the Government, through the Finance Minister, to nominate the board members, but this should be preferably done through a committee rather than a single individual.
The Act should then specify clearly the role of the directors, which would be to oversee the implementation of measures which will follow a highly specified investment policy and return objectives.
The investment policy should specify a low risk approach that would preserve members’ contributions, while at the same time providing a moderate rate of return.
It should also specify very broad allocation strategy between various classes of assets, for example Malaysian Government Securities, other investment-grade bonds, equities, property and real estate and other investments.
Changes to the EPF Act should clearly specify that directors and the fund should at all times act solely in the interest of members who own the funds in the first place. While the Government can borrow money from the EPF, it has no business inducing it to invest in businesses that have high risk.
That will stop the board from making a decision to invest in a project just because the Finance Minister or someone else told it so. Those with long memories will remember that the EPF has made strange investments before, like Time dotCom.
The changes to the Act should also specify in fairly specific terms the kind of disclosure that it makes. It should itemise all the investments it makes, and state when they were made and at what price, and how much it is losing or making on each one.
Averages have a way of disguising major outliers. On average, gains may be respectable but that does not mean major losses may not have been made on some investments. The only way to ensure that does not get buried under the mountain of funds is to disclose it.
These are not unrealistic changes. Many retirement funds act this way. Take CalPERS or California Public Employees’ Retirement System, the United States’ largest public pension fund with assets totalling some US$220bil (about RM660bil).
It publicly discloses its investment policy and asset allocation decisions. Those interested can view its investment track record. Journalists can ask for and receive its investment details for specific companies, areas and regions.
Here’s what it says in its own words: “Our goal is to efficiently and effectively manage investments to achieve the highest possible return at an acceptable level of risk. In doing so, CalPERS has generated strong long-term returns.”
We want EPF, whose size is not very far away from CalPERS, to do the same for all its members. The EPF does not belong to the Government and therefore the Government must not have full powers over the way it acts.
Until these changes to the Act are made and the EPF board acts professionally and above board in every decision it makes, taking all the required professional advice, we can’t ever be sure that EPF is always acting purely in the interests of its constituents – the Malaysian working public.
Independent consultant P Gunasegaram (t.p.guna@gmail.com) is happy that the EPF declared 6% dividends. He hopes it can continue to do so.
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2012年2月25日星期六
2012年1月4日星期三
Private equity fund raises US$16b
Blackstone Group will conclude fundraising for its latest buyout fund in January, raising just over US$16 billion ($20 billion), three people familiar with the matter said on Wednesday, in a four-year process challenged by the global financial crisis.
The fund is the largest in the market to complete its fundraising process and the sixth-biggest private equity fund ever raised, according to data firm Preqin.
Private equity firms raised US$263b in 2011, slightly less than in 2010, according to Preqin, and a far cry from the height of the buyouts boom leading up to 2007, when they pulled in around US$600b a year.
The size of the fund that Blackstone was able to raise in this environment shows that pension funds and other investors are getting more picky about which private equity firms they trust their money with. Some investors are also getting better deals on fees by negotiating large commitments.
“I don’t think we will see a large private equity fund like this closing for a few years,” said Sandler O’Neill & Partners analyst Michael Kim.
Fundraising for the latest buyout fund, Blackstone Capital Partners VI LP (BCP VI), began at the start of 2008 and the firm kicked off the fund’s investment period on January 7, 2011, giving it a 12-month deadline to reach final fundraising close, the people said.
Blackstone had already pushed back the final close as late investors asked for time to get approval from their investment committees and conduct their due diligence. A June 2010 memo by private equity advisor PCG Asset Management to the Oregon Public Employees’ Retirement Fund listed June 30, 2010 as the expected final closing date.
In November, Blackstone said it had raised over US$14b for the fund and Chief Operating Officer Tony James said the number will end up with close to US$15b.
But in July 2011, Blackstone Chief Executive Steve Schwarzman said the fund had topped US$16b and predicted that it would likely will be the largest to be raised for the next two or three years. The amount has remained about the same since then, the sources said.
Blackstone declined to comment.
NEGOTIATING A BETTER DEAL
BCP VI has attracted some of the world’s largest private equity investors, including the California Public Employees’ Retirement System and Canada Pension Plan Investment Board, according to disclosures by these pension funds.
Some investors took advantage of the protracted fundraising period either to tap a previously unavailable private equity allocation or negotiate a better deal.
Last month, the New Jersey Division of Investment said it planned to invest US$50 million in BCP VI as part of an investment programme across Blackstone’s alternative asset platforms that will total up to US$2.5b.
The New Jersey pension fund manager will pay a blended 1.3 per cent management fee on committed capital during the fund’s investment period and 0.75 per cent on invested capital after the period ends, as well as options for management fee offsets that Blackstone offered, according its investment committee report.
Private equity firms typically charge around 1.5 per cent of committed capital as a management fee, but investors may pay different fees based on the size of their commitments.
“Fundraising takes longer these days; this is not unique to Blackstone. But big investors are looking to give money to fewer private equity managers and the likes of Blackstone are a beneficiary of that,” Kim said.
BCP VI’s predecessor, BCP V, remains the largest private equity fund ever to be raised at US$21.7b, according to Preqin.
BCP VI’s first acquisition deals include the US$3b takeover of healthcare IT firm Emdeon and an investment of up to US$277m in Exeter Finance, which provides financing to auto dealers.
BCP VI had invested $620 million of its capital as of September 30, according to a November 10, 2011 presentation by Schwarzman to investors. Blackstone had about US$15.1b of available capital between BCP V and BCP VI, the presentation showed. The Emdeon deal was completed in November.
While Blackstone seeks so-called “dislocation” in markets for attractive asset values, financial market turmoil also affects its ability to source debt cheaply for deals, and hence its returns and transaction size.
The firm’s shares are up almost 40 per cent from a 2011 low of US$10.51 as prospects for the US economy brightened and concerns over the euro zone’s sovereign debt crisis eased slightly.
Global private-equity backed mergers and acquisition activity picked up in 2011, with total volumes up 32.2 percent year-on-year to US$306.3b, according to Thomson Reuters data.
- Reuters
http://tourism9.com/
The fund is the largest in the market to complete its fundraising process and the sixth-biggest private equity fund ever raised, according to data firm Preqin.
Private equity firms raised US$263b in 2011, slightly less than in 2010, according to Preqin, and a far cry from the height of the buyouts boom leading up to 2007, when they pulled in around US$600b a year.
The size of the fund that Blackstone was able to raise in this environment shows that pension funds and other investors are getting more picky about which private equity firms they trust their money with. Some investors are also getting better deals on fees by negotiating large commitments.
“I don’t think we will see a large private equity fund like this closing for a few years,” said Sandler O’Neill & Partners analyst Michael Kim.
Fundraising for the latest buyout fund, Blackstone Capital Partners VI LP (BCP VI), began at the start of 2008 and the firm kicked off the fund’s investment period on January 7, 2011, giving it a 12-month deadline to reach final fundraising close, the people said.
Blackstone had already pushed back the final close as late investors asked for time to get approval from their investment committees and conduct their due diligence. A June 2010 memo by private equity advisor PCG Asset Management to the Oregon Public Employees’ Retirement Fund listed June 30, 2010 as the expected final closing date.
In November, Blackstone said it had raised over US$14b for the fund and Chief Operating Officer Tony James said the number will end up with close to US$15b.
But in July 2011, Blackstone Chief Executive Steve Schwarzman said the fund had topped US$16b and predicted that it would likely will be the largest to be raised for the next two or three years. The amount has remained about the same since then, the sources said.
Blackstone declined to comment.
NEGOTIATING A BETTER DEAL
BCP VI has attracted some of the world’s largest private equity investors, including the California Public Employees’ Retirement System and Canada Pension Plan Investment Board, according to disclosures by these pension funds.
Some investors took advantage of the protracted fundraising period either to tap a previously unavailable private equity allocation or negotiate a better deal.
Last month, the New Jersey Division of Investment said it planned to invest US$50 million in BCP VI as part of an investment programme across Blackstone’s alternative asset platforms that will total up to US$2.5b.
The New Jersey pension fund manager will pay a blended 1.3 per cent management fee on committed capital during the fund’s investment period and 0.75 per cent on invested capital after the period ends, as well as options for management fee offsets that Blackstone offered, according its investment committee report.
Private equity firms typically charge around 1.5 per cent of committed capital as a management fee, but investors may pay different fees based on the size of their commitments.
“Fundraising takes longer these days; this is not unique to Blackstone. But big investors are looking to give money to fewer private equity managers and the likes of Blackstone are a beneficiary of that,” Kim said.
BCP VI’s predecessor, BCP V, remains the largest private equity fund ever to be raised at US$21.7b, according to Preqin.
BCP VI’s first acquisition deals include the US$3b takeover of healthcare IT firm Emdeon and an investment of up to US$277m in Exeter Finance, which provides financing to auto dealers.
BCP VI had invested $620 million of its capital as of September 30, according to a November 10, 2011 presentation by Schwarzman to investors. Blackstone had about US$15.1b of available capital between BCP V and BCP VI, the presentation showed. The Emdeon deal was completed in November.
While Blackstone seeks so-called “dislocation” in markets for attractive asset values, financial market turmoil also affects its ability to source debt cheaply for deals, and hence its returns and transaction size.
The firm’s shares are up almost 40 per cent from a 2011 low of US$10.51 as prospects for the US economy brightened and concerns over the euro zone’s sovereign debt crisis eased slightly.
Global private-equity backed mergers and acquisition activity picked up in 2011, with total volumes up 32.2 percent year-on-year to US$306.3b, according to Thomson Reuters data.
- Reuters
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2012年1月2日星期一
Nomura to invest in Shanghai private-equity fund
By Atsuko Fukase
TOKYO (MarketWatch) — Nomura Holdings Inc. said Wednesday it has agreed to invest in Shanghai-based private equity fund as part of efforts to enhance its local business platform in China.
Japan’s largest brokerage firm will invest in a fund managed by Jiu You Equity Investment Management LLP, a fund management firm that invests in the high tech and biopharmaceutical industries, Nomura said.
Nomura didn’t say how much it would
http://tourism9.com/
TOKYO (MarketWatch) — Nomura Holdings Inc. said Wednesday it has agreed to invest in Shanghai-based private equity fund as part of efforts to enhance its local business platform in China.
Japan’s largest brokerage firm will invest in a fund managed by Jiu You Equity Investment Management LLP, a fund management firm that invests in the high tech and biopharmaceutical industries, Nomura said.
Nomura didn’t say how much it would
http://tourism9.com/
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