Discussion : Should EPF Invest In CSE??

Rapaport · 1 Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 9:58 am

Rapaport

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Hi Guys,

In my opinion EPF should invest atleast 10% of its money into the CSE. When you look at the past performance of the CSE and the future potential, CSE can give significant returns for EPF. Also EPF has the holding power and it can save the market in big falls.

However the EPF investments must be closely monitored by authorities and must be free of corruption and insider deals. There should be transparency and a new investment board must be appointed to handle these transactions.

There are news that rules are being amended to allow EPF to make CSE investments. Rules also must be put to make the people involved responsible for the deals on behalf of EPF and the time is now ripe for EPF to enter with its money with the economy showing some signs of recovery as well. CSE PE around 10X (Bloomberg) and Asian markets trade at an average between 13X-15X

Opinions welcome!

Cheers!

Antonym · 2 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 10:06 am

Antonym

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I agree; EPF should invest upto a specified percentage of its funds in the CSE with the objective of enhancing returns on employee funds.

By occasionally acting as 'buyer of last resort' during market downturns, the EPF has the opportunity to buy low and sell high.

The investment arm of the EPF should operate as an independent fund manager would.

The Alchemist · 3 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 11:34 am

The Alchemist

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from the last published info on the EPF, I understand their Fund Profile as follows :
Fund Size = 1 Trillion Rupees
Investment in CSE = 70 Billion Rupees (7 %)
Investment income from Fund Sources = 100 Billion Rupees per year
Net Inflow to Fund from EPF Contributions = 25 Billion per year
Net Outflow from Fund to Pensioners = 25 Billion per Year

The EPF should subcontract the Investment Management function to an Independent Professional 3rd Party or Parties. This way they will avoid conflicts of Interest and dubious deals.
In regard to the % quantum of investment in equities, they should follow international guidelines of asset mix in fund. This follows an actuarial valuation of the Fund that International funds like Calphers (largest pension fund in the world - California pension scheme ) follow. Perhaps they could even include foreign equities, Gold and other metals for diversification.

Asset Class Actual Investment ($ Billions) Actual Investment % Interim Strategic Target %1

Growth $153.0 65.0% 64.0%
Public Equity $120.0 51.0% 50.0%
Private Equity $33.0 14.0% 14.0%
Income $40.4 17.0% 17.0%
Liquidity $8.0 3.0% 4.0%
Real Assets $21.8 9.0% 11.0%
Real Estate $18.9 8.0% 9.0%
Forestland/
Infrastructure $2.9 1.0% 2.0%
Inflation $7.5 3.0% 4.0%
Absolute Return
Strategy $5.2 2.0% N/A
Total Fund* $236.0 100.0% 100.0%
1 Target allocation effective July 2011.
* Figures are rounded for viewing purposes.
Dated: 06-05-2012

Source - Calphers website
(i tried to align the rows and columns in the Calphers table to read better but when previewed it does not align correctly)

Calphers pension fund size is usd 236 Billion . they have invested usd 153 Billion in Public and Private Equity. this is nearly 65 % !
So perhaps EPF has a very long way to go ?

WildBear · 4 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 11:48 am

WildBear

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EPF is a massive fund when compared to Sri Lankan economy. It has a significant amount of defunct cash too which people never will come to claim(eg- people who migrated,died, and many who work for shorter periods in employees and contributed only couple of yearwhich they have forgotten and don't come to claim at all.)
This fund can contribute to Sri Lankan economy immensely but unfortunately fund managers foul play has hinder its potential. Eg. Deals in Galadhari, LGL at premium etc.
EPF can play a big role not only at CSE but in private equity market as well. Eg. They can venture in to a private university with a foreign partner and contribute to educational development and at the same time they can give a certain percentage of scholarships to the Children of its members. They can build private hospitals to give health service with a profit and at the same time at concessions to its membership etc benifiting both the contributors ant the country.
Unfortunately neither fund managers-CB nor the membership have interested in new developments like this.

aj · 5 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 12:32 pm

aj

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I think EPF fund should be given to Sarath R to manage or Taprobane
Attention: This post contains sarcasm

bullrun · 6 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 12:53 pm

bullrun

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If EPF could managed to buy a considerable amount of valuable stock recent past in this artificial down (some share even below the book value) they could have earn huge money. But it was not append. Everyday sudda bought valuable shares at lower prices.

Our pundits in opposition (who do not know the real interest of the party to which they belong) shouted that ETF is wasting people's money in vain. So, saying pave the way to sudda to buy. What to do.

Dileepa · 7 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 7:58 pm

Dileepa

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Already EPF is the largest fund in the market.
Why should EPF should invest heavily on risky businesses?
I think EPF has invested more than enough in the market.
Imagine if EPF invest 20% of its cash in CSE, That is more than the market free float.
Then to whom EPF will sell those shares to make a profit?

We should not see this as our own survival, After all it is peoples money(and ours).
I strongly believe that EPF should be the second largest fund in the market(not the first).
What is the point of you buying your Father's car and selling back to him for a profit and vice versa.
Eventually you two will be exchanging a worthless land at a higher price.

What we need is any thing other than EPF.
For that we have to present an attractive economy and that is the ultimate job.

Last edited by Dileepa on Fri Jun 15, 2012 7:59 pm; edited 1 time in total (Reason for editing : spelling)

bullrun · 8 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 8:33 pm

bullrun

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Dileepa wrote:Already EPF is the largest fund in the market.
Why should EPF should invest heavily on risky businesses?
I think EPF has invested more than enough in the market.
Imagine if EPF invest 20% of its cash in CSE, That is more than the market free float.
Then to whom EPF will sell those shares to make a profit?

We should not see this as our own survival, After all it is peoples money(and ours).
I strongly believe that EPF should be the second largest fund in the market(not the first).
What is the point of you buying your Father's car and selling back to him for a profit and vice versa.
Eventually you two will be exchanging a worthless land at a higher price.

What we need is any thing other than EPF.
For that we have to present an attractive economy and that is the ultimate job.

Yes Deleepa,

It makes a sens,
But can you remember very recently EPF sold a quantity to a foreign party. I feel that sort of thing can be done. It does not mean that total money that ETF has should invest, but subject to the percentage that they have already fixed.

WildBear · 9 Re: Discussion : Should EPF Invest In CSE?? Fri Jun 15, 2012 8:46 pm

WildBear

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If Sri Lanka seeking economic prosperity, it can develop it's own "Sovereign Wealth Fund" to invest not only ib CSE or SL but in other emerging markets as well. Classic example is Singapore's state controlled Temasek Fund which started in 1974 and now valued closer to $ 200 billion, which is about four times higher than our annual GDP. Can't our leaders think in the way that Singaporeans thought 40 years back. SL can divert some amount if Nation Building Tax or Lottery board money to build such a fund.
www.Temasek.com.sg. Now Temasek own stakes of global banking,telecommunications and many other growth sectors