Khazanah’s returns: 9.3% p.a. – CPF?


What are our returns compared to Khazanah’s 9.3% p..a.?

I refer to the articles “Khazanah says it has high annual returns” and “CPF Investment Scheme funds up average of 2.7% in Q3” (Straits Times, Nov 30).

The former states that “But Khazanah said that its Net Worth Adjusted (NWA) – which is realised and unrealised returns, as well as dividends – had more than tripled since managing director Azman Mokhtar took over in mid-2004.

“This translates into an annual compounded return of 9.3 per cent per annum over the 13-year period, rather than just the 1 per cent or 2.6 per cent return as is implied by the articles,” it said.

The Straits Times, after analysing Khazanah’s published financial records, had reported that the fund’s dividend rate was below 1 per cent while its profit before tax was 2.65 per cent of the fund size during the same period.

The fund confirmed that its NWA growth was lower than the Kuala Lumpur Composite Index’s 9.4 per cent pace during those 13 years. The index is the benchmark for Malaysia’s stock exchange.

The Straits Times had also found that Khazanah’s NWA growth was slower than that of China Investment Corporation (CIC).

Khazanah’s profit before tax, before taking into account unrealised gains and losses, was also lower than Singapore’s Temasek Holdings, CIC, Alaska Permanent Fund Corporation and the world’s largest sovereign fund, Norway’s Government Pension Fund Global”.

So, since Khazanah’s annualised return was 9.3 per cent in the last 13 years – what was the return derived from investing our CPF funds, relative to the 2.5 per cent interest paid on our CPF Ordinary Account?

In this connection, the latter article states that “CPF members who invested in funds that are part of the Central Provident Fund Investment Scheme (CPFIS) reaped average returns of 2.7 per cent in the three months to Sept 30.

During the same period, CPFIS-included unit trusts rose 3.06 per cent, while investment-linked insurance products (ILPs) increased 2.49 per cent, according to fund research firm Thomson Reuters Lipper on Wednesday (Nov 29).

For all CPFIS-included funds, equities posted positive returns of 3.50 per cent, mixed-asset added 2.23 per cent, while bonds and money market funds grew 0.33 per cent and 0.15 per cent respectively.

For the year to Sept 30, CPFIS funds delivered an average return of 13.14 per cent, with unit trusts up 14.76 per cent and ILPs rising 12.19 per cent. Meanwhile, the MSCI AC Asia ex Japan Index soared 22.53 per cent while the Citigroup WGBI TR fell 3.08 per cent. For the one-year period, on average, equities (+17.57 per cent) outperformed bond offerings (+0.08 per cent), mixed-asset (+10.13 per cent) and money market funds (+0.57 per cent).

CPFIS-linked funds performed better when viewed over the longer term. Their performance for the three-year period ended September was up 19.25 per cent on average. Unit trusts soared 19.90 per cent over the same period while ILPs rallied 18.93 per cent. For comparison, during this period, MSCI AC Asia ex-Japan Index rallied 34.86 per cent and Citigroup WGBI TR rose 9.32 per cent. Equities were the lead gainer with growth of 23.30 per cent, while bonds posted 8.55 per cent returns on average.”

Why is it that normally only one and 3-year annualised returns are reported in the media? Why is it that the 5, 10, 20-year and from inception annualised returns of the CPFIS are not reported?

Leong Sze Hian



About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.