Alizakri Alias, the EPF’s chief executive officer, hinted earlier this week that the fund may increase its foreign exposure when it reviews its asset allocation plan.

EPF, Malaysia’s largest pension fund, invested 611.14 billion ringgit (US$149.62 billion), or 73.3% of its 833.76 billion ringgit assets under management at the end of last year, within Malaysia.

That share is almost one-fifth the size of the country’s total capital market, which Securities Commission Malaysia pegged at 3.08 trillion ringgit in 2018.

"That's way too big of an investment exposure for a pension fund in one market,” a Kuala Lumpur-based fund manager tells Asia Asset Management (AAM), speaking on condition of anonymity.

He contrasts it with Japan’s Government Pension Investment Fund (GPIF), the world’s biggest pension fund.

“If you look at Japan's pension fund GPIF, its investment into Japanese stocks only represents about 5% of the overall market capitalisation of the Japanese stock market," he says.

The EPF’s current asset allocation plan, covering 2017-2019, calls for the fund to invest up to 51% of its assets in bonds, 36% in stocks, 10% in real estate, and 3% in money markets. As well, up to 32% of its assets is to be invested abroad.

Currently, 26.7% of the EPF’s assets, amounting to 222.61 billion ringgit, is invested overseas across 40 countries, according to data from the pension fund.

Mr. Alizakri told reporters the fund will work with its consultants this year to review its strategic asset allocation for the 2020-2022 period, with the details to be unveiled next year.

"The Malaysia market is now too small for us, and we need to diversify and move to other markets...We also need to be working with other fund managers with different strategies, and those with access to other asset classes," he said at a February 18 media briefing about the fund’s financial performance last year.

According to Khairi Shahrin Arief Baki, chief executive officer of Kuala Lumpur-based fund management firm i-VCAP Management, greater exposure to foreign investment would be the "right move" for the EPF.

"It needs to invest overseas for better returns," Mr. Khairi tells AAM.