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Sri Lanka Equity Forum » Stock Market Talk » Expert Chamber » EPF/ETF - Poor invesment strategies...

EPF/ETF - Poor invesment strategies...

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1EPF/ETF - Poor invesment strategies...  Empty EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 4:40 am

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I always had this question. Do the EPF funds get invested in good shares?? and do the department analyst do proper study in stock before buying ??

EPF/ETF are people`s money. I think they have done so much mistakes before and im quite shocked who advice to buy.

i can remember, EPF bought huge qty of SPEN at 220, then 180 level , again 167 , latest 135 . And now its 134.. Why such a poor investments ? I mean we all know SPEN and most of the hotels got a higher PE. I mean just using simple ratios anyone can understand that SPEN is over-valued until it falls to 130-135 levels.. How many additional no.of shares EPF would ve got more no of shares, if they bought at 130-140 levels instead of 180-220 levels..

And mind you, EPF invested on GRAN at 220 levels..

Related articles :

http://www.ft.lk/2011/06/29/epf-active-in-sluggish-bourse/

http://www.ft.lk/2011/05/25/epf-buys-1-m-more-shares-of-spence-hotel-holdings/

http://www.ft.lk/2011/04/21/epf-invests-more-in-aitken-spence/



Last edited by Think9 on Wed Jun 29, 2011 4:46 am; edited 1 time in total (Reason for editing : spellings)

2EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 4:48 am

duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I think holding companies should go around a PE ratio of 10 because they're just a holding company. That means it should come around half its current value.

3EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 5:35 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
This is a big topic.

The open secret / rumor in the stock market is that the guys who decide what shares to be bought by these funds first collect them in big quantities for their own accounts using the big loans given by friendly banks ( the lenders know there will be no problem).
With the buying interest the prices go up and when the prices reach peak the funds wake-up and buy shares.

If you analyze the history of the shares bought by these fund for past 1-2 year you may see they didn't touch them even when we were buying. All of sudden they come in and buy in big quantities when others sell to get profits.

4EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 5:39 am

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@duke wrote:I think holding companies should go around a PE ratio of 10 because they're just a holding company. That means it should come around half its current value.

Yes. Largely diversified holdings should be subjected to "Conglomeration Discount" in calculating their fair value. Thus PE should be lower.

5EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 6:41 am

xhora

xhora
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
It was proven in a TV political discussion that when last year stock market grown about 90+% return on investments to EPF fund was only about 4% what a waste.

6EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 6:52 am

duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Chinwi wrote:This is a big topic.

The open secret / rumor in the stock market is that the guys who decide what shares to be bought by these funds first collect them in big quantities for their own accounts using the big loans given by friendly banks ( the lenders know there will be no problem).
With the buying interest the prices go up and when the prices reach peak the funds wake-up and buy shares.

If you analyze the history of the shares bought by these fund for past 1-2 year you may see they didn't touch them even when we were buying. All of sudden they come in and buy in big quantities when others sell to get profits.

Like what a person named Nimal Perera did.
http://www.ft.lk/2011/05/05/deals-within-deals-only-spark-in-bourse/

May be in civilized countries these things make investigations.

7EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 7:48 am

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Most of so called High Net-worth Individuals have similar stories some where in their life lines. The CSE can't make attractive for foreigners if rulers do not take steps to punish and stop inside traders and manipulators.

8EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 7:50 am

econ

econ
Global Moderator
it seems that those central bank fund managers do not care about public funds like EPF,ETF..

9EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 10:07 am

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
And this s what Dr.harsha de silva has to say-

http://www.ft.lk/2011/04/01/dr-harsha-de-silva-challenges-central-bank-on-epf%E2%80%99s-investments/

Btw guys check out the crossings today on SPEN and AHUN.. EPF buyin more to avg ?? hehe. probably someone has seen the post.. lol. . ( joke )


TODAY'S CROSSING

Time Crossings

13:37:49 AHUN 299,432 @ 75.00
13:37:20 AHUN 275,905 @ 75.00
12:39:30 AHUN 2,000,000 @ 75.00
12:07:06 SPEN 171,000 @ 133.00
12:06:36 SPEN 237,500 @ 133.00
12:00:53 SPEN 500,000 @ 133.00
11:58:35 SPEN 500,000 @ 133.00
11:44:29 SPEN 500,000 @ 133.00
11:44:19 SPEN 500,000 @ 133.00
11:42:53 SPEN 500,000 @ 133.00
11:42:25 SPEN 250,000 @ 133.00

10EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 10:09 am

duke


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@xhora wrote:It was proven in a TV political discussion that when last year stock market grown about 90+% return on investments to EPF fund was only about 4% what a waste.

Are the EPF reports available anywhere? I'm also an investor of the fund as most of you.

11EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 10:23 am

gamaya


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
They bought Gran at 200 laughs at 50.

They can easily buy at lows like this. Even newcomers to CSE have made much more gains than this. I wonder what kind of analysis they do before buying.

12EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 10:31 am

eeyohan


Manager - Equity Analytics
Manager - Equity Analytics
dear Friends EPF and ETF got enough holding power more than 20 y ... they can hold ... don't worry abt it

13EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 10:36 am

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
safeguarding some of the investors ?? ; ) Im sure it is a factor as well.

talk about GRAN. it hit 260 making it up 20 - 30 rupees per day but CSE didnt band it at all. but now it around 100 - 110 levels which is 150% down. I feel GRAN will come to 70 levels and will again start sky rocketing.

AND IM SURE ! CSE wont band it . never !

14EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 10:46 am

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@ eeyohan : I think i ve to teach u how EPF and ETF works until we get retire.. but well........... u knw! i cant waste time..

but just an economy lesson :

when you HOLD.

Hold = saving = economy leakage. When economies is not circulating well, the growth is pretty less. That wats happening in developing countries. so it consumers / gvmnts resposibility to make sure things money get circulated .

example : By the time SPEN reach 300 , I can buy and sell in different levels and gain more than 1000% profits.. and if the gvt has done the investments properly Im sure they would ve developed the country more. At least to cover the huge loss gvt get from water board .lol. but in terms of business, i called it " Poor investment strategies " .



15EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 12:13 pm

aladdin

aladdin
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Guys i feel all of u are going on a wrong direction. A fund like EPF is not investing on short or medium. Normally they invest looking at the long run such as 5-10 years of profit realization. In that view what above discussed will not be valid. Many think that the decision made by EPF is wrong because majority is in the set of mind of look at the short run.

But one thing is bit suspicious to me. All the time the seller was same to EPF. May be a core incident. But who knows.

I report u decide.

16EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 1:47 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@aladdin wrote:Guys i feel all of u are going on a wrong direction. A fund like EPF is not investing on short or medium. Normally they invest looking at the long run such as 5-10 years of profit realization. In that view what above discussed will not be valid. Many think that the decision made by EPF is wrong because majority is in the set of mind of look at the short run.

But one thing is bit suspicious to me. All the time the seller was same to EPF. May be a core incident. But who knows.

I report u decide.

Just because you are going to hold for long why do you pay more?

Suppose you gonna buy a land to hold for 20 years, if you can buy it for X would you pay X+Y and buy?. It is always beneficial to buy at low regardless the time-frame ! No more justifications are needed (common sense), I suppose.

17EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 2:13 pm

wis


Manager - Equity Analytics
Manager - Equity Analytics
@xhora wrote:It was proven in a TV political discussion that when last year stock market grown about 90+% return on investments to EPF fund was only about 4% what a waste.

Is it really 4%? Anyway not a surprise if it is.

18EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 2:41 pm

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
agree with academic.. it is commonsense ALLADIN..

generally why do a bank giv us a loan?. coz they use it to earn higher by re-investing. Same as for EPF /ETF funds. What they do as holding, they re-invest in order to gain more. And from the gain they get, they can use for the benefit of the country. Im not sayin our EPF and ETF are on a risk, what im saying is y can they invest wisely and do more things.. im pointing the finger on EPF n ETF board.

im sure now the 4% also not there. : D .

19EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 3:21 pm

aladdin

aladdin
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Academic wrote:
@aladdin wrote:Guys i feel all of u are going on a wrong direction. A fund like EPF is not investing on short or medium. Normally they invest looking at the long run such as 5-10 years of profit realization. In that view what above discussed will not be valid. Many think that the decision made by EPF is wrong because majority is in the set of mind of look at the short run.

But one thing is bit suspicious to me. All the time the seller was same to EPF. May be a core incident. But who knows.

I report u decide.

Just because you are going to hold for long why do you pay more?

Suppose you gonna buy a land to hold for 20 years, if you can buy it for X would you pay X+Y and buy?. It is always beneficial to buy at low regardless the time-frame ! No more justifications are needed (common sense), I suppose.


brother as every one else the people who drive that fund also cannot 100% predict the market. I am prety sure that when EPF was buying these shares, those showed a buy signal in all the technical as well as the fundamentals. Unfortunately due to many reasons the price has drop by now. So what i said is, the are not looking at short term. They look very very long term That is the reason they keep on buying mate. Look what will happen in 5-10 years time. I am 100% sure they get more than 100% profit. If they deposit the money in TB's they will end up geting just max 50% for 5 years. That is what i wanted to explain.

20EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 3:25 pm

aladdin

aladdin
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Think9 wrote:agree with academic.. it is commonsense ALLADIN..

generally why do a bank giv us a loan?. coz they use it to earn higher by re-investing. Same as for EPF /ETF funds. What they do as holding, they re-invest in order to gain more. And from the gain they get, they can use for the benefit of the country. Im not sayin our EPF and ETF are on a risk, what im saying is y can they invest wisely and do more things.. im pointing the finger on EPF n ETF board.

im sure now the 4% also not there. : D .

As i explained in reply to Acadamic, if we look at this in a small scope of a mentality of getting high return in short term, then yes EPF has failed. But think of the broaden scop and potentials of the companies they bought. Then u can see the big picture. But saying so, i said i am but suspicious about the transactions because always (Most of the time) the seller was same. Who knows. Anything is possible in CSE.

21EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 3:43 pm

factFINDER

factFINDER
Manager - Equity Analytics
Manager - Equity Analytics
@aladdin wrote:Guys i feel all of u are going on a wrong direction. A fund like EPF is not investing on short or medium. Normally they invest looking at the long run such as 5-10 years of profit realization. In that view what above discussed will not be valid. Many think that the decision made by EPF is wrong because majority is in the set of mind of look at the short run.

But one thing is bit suspicious to me. All the time the seller was same to EPF. May be a core incident. But who knows.

I report u decide.

Investment strategy of mutual funds like EPF and the strategies adopted by individual investors both retailers/HNWI can be totally different, followings are among few of many reasons;

1. They (mutual funds like EPF) have large and continuously growing fund base/cash flow (just examine the total fund base of EPF and their annual collection/payment)

2. They have holding power as long as 10-25 years (just examine who are the target buyers of 20-50 yrs bonds/debt securities issued in international markets)

3. They usually sell/buy large quantities (may be 100-500 millions a single transaction) and probably negotiated dealings, not similar to collecting small quantities at the bottom.

It is no surprise that EPF buys SPEN at different price levels 220-180-167-135 ... etc, as when CSE sliding blue-chip stocks become more attractive and those who have sufficient fund and holding power may aggressively enter. (See DIST also has increased its stake from 18% to 22.30% last year.) I guess the main reason behind EPF's move in to SPEN is their investment in Colombo Port Development Project which SPEN holds 30% stake. (see what is the contribution for JKH from SAGT Venture). The strategy may be an utter failure for individual investors due size of allocation and lesser holding power (this can understand by looking at top20 list of SPEN)

I'm not telling that all investment decisions taken by EPF are good. Investment decisions may not always deliver optimal result, so some of the investment decisions may not good as others and some assumptions may go otherwise too. But we have to understand difference between their investment strategies and ours.

You may not be convinced yet, well .... if EPF make poor investment decisions because of they use "poor members' hard earned money" just think of NAVF.U's case; all you know majority of units hold by HNB and DFCC (and promised not to withdraw until end of 10 yrs period) the owners of Co-managers of the fund (NAVF) - Acuity Partners. See just less 25% (one firth) of the total fund has invested in CTHR (you may examine cost per share as well) and “Is it the most attractive/cheapest stock in CSE to NAVF to have such an exposure??” … then why do Acuity-NAMAL need to take poor decisions at expense of their own money? THINK!


Declaration: SPEN represent only 1.20% of my portfolio value but lot more my contributions are with EPF , so I don’t want promote SPEN or safeguard EPF’s investment strategy.

22EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Wed Jun 29, 2011 7:07 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@aladdin wrote:
@Academic wrote:
@aladdin wrote:Guys i feel all of u are going on a wrong direction. A fund like EPF is not investing on short or medium. Normally they invest looking at the long run such as 5-10 years of profit realization. In that view what above discussed will not be valid. Many think that the decision made by EPF is wrong because majority is in the set of mind of look at the short run.

But one thing is bit suspicious to me. All the time the seller was same to EPF. May be a core incident. But who knows.

I report u decide.

Just because you are going to hold for long why do you pay more?

Suppose you gonna buy a land to hold for 20 years, if you can buy it for X would you pay X+Y and buy?. It is always beneficial to buy at low regardless the time-frame ! No more justifications are needed (common sense), I suppose.


brother as every one else the people who drive that fund also cannot 100% predict the market. I am prety sure that when EPF was buying these shares, those showed a buy signal in all the technical as well as the fundamentals. Unfortunately due to many reasons the price has drop by now. So what i said is, the are not looking at short term. They look very very long term That is the reason they keep on buying mate. Look what will happen in 5-10 years time. I am 100% sure they get more than 100% profit. If they deposit the money in TB's they will end up geting just max 50% for 5 years. That is what i wanted to explain.


Lets do little maths.

As you say If EPF earn 100% after 10 years , the annually compounded return is

= 2^(1/10)-1

=7.2%

Current TB (7.25%, 4y 10m) yield rate is 8.6% (see in http://www.cbsl.gov.lk/pics_n_docs/latest_news/pd_bond.pdf )

This simply shows which alternative is better!

@ factFINDER,

You have valid points. However, transaction cost consists of both tangible and non-tangible items like opportunity cost and market impact. If an investor can't find a sensible price for intended volume due to intangible costs, s/he or mutual fund should avoid that investment. It is not prudent to buy anyhow at a premium.

Also, wrong investment decisions made by other funds can't justify EPF's poor performance. One particular investment decision may go wrong as in your example, but if whole portfolio of EPS is doing just 4% when market was doing near 100%. There should be something wrong there.

23EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 4:18 am

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@ factFINDER, : thanks for ur valuable input , guess we managed to bring the discussion to level 2. : )

Just look what Dr.Harsha wanted to explain in his article (I posted this in ma send msg ) . I too work as a analyst and I know how companies tryin their best to get huge amount of quantities at a lower price with negotiating with brokers. Sometimes internal transactions such as company to company too happen. (Like we see crossings every day). Transaction only happens if the buying company see a strong potential growth and to get at the best possible rate. Many companies have the holding power like EPF/ETF. But the factor is you always should buy at the right price.
Would like to be back on ur reasons :
1. Large and continuously growing fund base/cash flow - True you might have continuous growing fund base but, the re-investment strategies should be good. Imagine! You have that much money in you’re a/c . Will u buy SPEN at 220 – 180 levels?? I mean a PE of more than 30 ++++ . And u buy SPEN ? com`n I bet u, u wont.

2. holding power as long as 10-25 years – true they ve a good holding power but like I said, its nt a direct factor should consider, coz we’re talking about the investment strategy. Holding money is never a good option for the economy.

3. sell/buy large quantities – It is negotiating dealings, But the buyer demand the price he would buy unless that the seller cannot think of. Where is the professional demanding skills of the EPF ? You go to whole sale shop and will you ever buy 500Kg of rice for the retail price ?

4. “I guess the main reason behind EPF's move in to SPEN is their investment in Colombo Port Development Project which SPEN holds 30% stake.” – This im not aware of. If you find an article regarding this please do pass the link.

What about the risk and uncertainty factors? Shouldn’t we consider inflation ? global economy down turn ? oil prices in 10 yrs ? exchange rate dis-advantages ? Global warming ? natural disasters ? well…. That’s why buyin at the best price is important. (In negotiating transaction as well. )
ANYWAY ! this discussion not trying to pin point on gvt or anything. We`re just sharing our ideas so we gather more knowledge and different views of ppl.

24EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 11:29 am

CSE1

CSE1
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Think9 wrote:I always had this question. Do the EPF funds get invested in good shares?? and do the department analyst do proper study in stock before buying ??

EPF/ETF are people`s money. I think they have done so much mistakes before and im quite shocked who advice to buy.

i can remember, EPF bought huge qty of SPEN at 220, then 180 level , again 167 , latest 135 . And now its 134.. Why such a poor investments ? I mean we all know SPEN and most of the hotels got a higher PE. I mean just using simple ratios anyone can understand that SPEN is over-valued until it falls to 130-135 levels.. How many additional no.of shares EPF would ve got more no of shares, if they bought at 130-140 levels instead of 180-220 levels..

And mind you, EPF invested on GRAN at 220 levels..

Related articles :

http://www.ft.lk/2011/06/29/epf-active-in-sluggish-bourse/

http://www.ft.lk/2011/05/25/epf-buys-1-m-more-shares-of-spence-hotel-holdings/

http://www.ft.lk/2011/04/21/epf-invests-more-in-aitken-spence/

SPEN not @ 220 its on @230 (not sure i remmember it 18 mili shares)

25EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 11:31 am

CSE1

CSE1
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Wednesday, June 29, 2011
EPF portfolio Rs 924 b by May 2011

Investments in corporate debt securities soon :

Ravi Ladduwahetty

The Employees Provident Fund (EPF) has an astronomical Rs 924 billion in its investment portfolio by end May 2011. Of the total investment portfolio of Rs 924 billion as at May 31, 2011, the Fund has invested Rs 856 billion in Treasury Bills and other government securities, accounting for 92.7% of the total portfolio, Central Bank’s EPF Superintendent Rupa Dheerasinghe told Daily News Business yesterday.

Of the remaining investments, there is Rs 57.28 billion or 6.2% of the total portfolio which is invested in listed and unlisted equities of which there is Rs 53 billion which accounts for 5.5% of the total portfolio in listed equities while the investment portfolio in unlisted equities is Rs 7.1 billion or 0.7% There is also 0.5% or Rs 4.62 billion invested in Reverse Repo.

“Our investments in unlisted equities and Reverse Repo is very small, she said.

Of the Rs 53 billion in listed and unlisted equities, banks, finance and insurance companies account for Rs 18.55 billion or 35%, while diversified holdings have Rs 15.9 billion or 30%. The hotel and travel company equities have Rs 4.77 billion or 9% of the EPF funds while the portfolio in manufacturing companies account for Rs 3.18 billion or 6%. The investments in the construction and engineering sector are Rs 2.65 billion or 5% while the telecommunication sector accounts for Rs 1.59 billion or 3% and all other equities Rs 6.36 billion or 12%, Dheerasinghe said. However, she conceded that the investments in the unlisted equities were relatively small.

She said that the Fund was managing the monies of the people and was extremely vigilant in the manner of making the investments being acutely conscious of the security of the people some of whom have their lifetime’s savings in the EPF. “We are safeguarding the interests of the EPF members while giving them the best possible returns. We made an overall return of 15% for all our investments, she said.

“We are extremely careful when making the investments and our decisions are made by a fully-fledged team of Fund Managers who are acutely conscious of the market developments and fluctuations and their decisions are backed scientifically,” she said.

The number of member accounts by end May has been 13.3 million and the contributing employees has been 62,000 as at December 31, 2010.

The EPF will also shortly go in for investments in corporate debt securities, which will yield very positive returns as well, she said.

source - www.dailynews.lk

26EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 11:50 am

mono

mono
Vice President - Equity Analytics
Vice President - Equity Analytics
There is alot of talk here about a couple of bad investments. but what is the actual track record of the EPF. I feel like the EPF is so big that they can't really beat the market at least by much.

27EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 3:37 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@mono wrote:There is alot of talk here about a couple of bad investments. but what is the actual track record of the EPF. I feel like the EPF is so big that they can't really beat the market at least by much.

Nice to see you after long (at least I saw after long flower). The market impact cost is crucial for large funds in CSE. So I don't expect EPF to beat the market.

15% overall return does not tell us anything about 6% of total portfolio, equity portfolio, performance. Why don't they disclose that information in above article, if they really wanted to address the rumors spreading? Question Since EPF is a public (people's) fund, I'm in the opinion that they should disclose details of portfolio performance to at least members. Do they?

28EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 4:10 pm

MoneyLover

MoneyLover
Senior Equity Analytic
Senior Equity Analytic
@CSE1 wrote:Wednesday, June 29, 2011
EPF portfolio Rs 924 b by May 2011

Investments in corporate debt securities soon :

Ravi Ladduwahetty

The Employees Provident Fund (EPF) has an astronomical Rs 924 billion in its investment portfolio by end May 2011. Of the total investment portfolio of Rs 924 billion as at May 31, 2011, the Fund has invested Rs 856 billion in Treasury Bills and other government securities, accounting for 92.7% of the total portfolio, Central Bank’s EPF Superintendent Rupa Dheerasinghe told Daily News Business yesterday.

Of the remaining investments, there is Rs 57.28 billion or 6.2% of the total portfolio which is invested in listed and unlisted equities of which there is Rs 53 billion which accounts for 5.5% of the total portfolio in listed equities while the investment portfolio in unlisted equities is Rs 7.1 billion or 0.7% There is also 0.5% or Rs 4.62 billion invested in Reverse Repo.

“She said that the Fund was managing the monies of the people and was extremely vigilant in the manner of making the investments being acutely conscious of the security of the people some of whom have their lifetime’s savings in the EPF. “We are safeguarding the interests of the EPF members while giving them the best possible returns. We made an overall return of 15% for all our investments, she said.

“We are extremely careful when making the investments and our decisions are made by a fully-fledged team of Fund Managers who are acutely conscious of the market developments and fluctuations and their decisions are backed scientifically,” she said.

source - www.dailynews.lk

EPF's total investment portfolio is Rs 924 billion
The overall return for EPF is 15%.

Rs 856 billion or 92.7% has been invested in government securities which are zero risk but very low return (in last year, about 7%-9%p.a.).
Total investment in equity 6.2% or Rs. 57.28 B

Will do a simple math ..... (I may be wrong)

Total return Rs. 924 B X 15% = 138.6 B

Approx return from govt securities Rs. 856 B X 9% = 77.04 B
Approx return from govt securities (RGS) Rs. 856 B X 10% (optimistically) = 85.6 B


Therefore, the balance Rs. 61.56 B came from equity investments of Rs. 57.28 B (or 53 B at 10% RGS)
then the return on equity investment should be;
@RGS 9%-------61.56 B / 57.28 B = 107.5%
@RGS 10%------53 B / 57.28 B = 91.7%
I noticed some of the forum members mentioned above that return on EPF's investment portfolio is only 4%, Can it be possible??

But, my calculations may be inncorrect as EPF's total return may include large amount of unrealized gains and we don't know how many years EPF already held those securities/shares (as time of investment is critical for this calculation), but I don't think actual return is as low as 4%.

@factfinder,
Most of us does not aware of 30% investment in Colombo Port Project. But, I heared there was a bid filed by SPEN with Singapore Port for Colombo South Port Development Project. No any idea whether it awarded to SPEN/Singapore Port or not. Also not aware of equity protion of SPEN in the venture. So, if you have any information in that regard, please share with us.

29EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 4:20 pm

wis


Manager - Equity Analytics
Manager - Equity Analytics
SPEN's 30% investment in Colombo South Port Development Project was announced several years ago.
It would take at least another 2 - 3 years for the construction. But the timeline has been extending bit by bit.

30EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 4:54 pm

Academic


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@MoneyLover wrote:
@CSE1 wrote:Wednesday, June 29, 2011
EPF portfolio Rs 924 b by May 2011

Investments in corporate debt securities soon :

Ravi Ladduwahetty

The Employees Provident Fund (EPF) has an astronomical Rs 924 billion in its investment portfolio by end May 2011. Of the total investment portfolio of Rs 924 billion as at May 31, 2011, the Fund has invested Rs 856 billion in Treasury Bills and other government securities, accounting for 92.7% of the total portfolio, Central Bank’s EPF Superintendent Rupa Dheerasinghe told Daily News Business yesterday.

Of the remaining investments, there is Rs 57.28 billion or 6.2% of the total portfolio which is invested in listed and unlisted equities of which there is Rs 53 billion which accounts for 5.5% of the total portfolio in listed equities while the investment portfolio in unlisted equities is Rs 7.1 billion or 0.7% There is also 0.5% or Rs 4.62 billion invested in Reverse Repo.

“She said that the Fund was managing the monies of the people and was extremely vigilant in the manner of making the investments being acutely conscious of the security of the people some of whom have their lifetime’s savings in the EPF. “We are safeguarding the interests of the EPF members while giving them the best possible returns. We made an overall return of 15% for all our investments, she said.

“We are extremely careful when making the investments and our decisions are made by a fully-fledged team of Fund Managers who are acutely conscious of the market developments and fluctuations and their decisions are backed scientifically,” she said.

source - www.dailynews.lk

EPF's total investment portfolio is Rs 924 billion
The overall return for EPF is 15%.

Rs 856 billion or 92.7% has been invested in government securities which are zero risk but very low return (in last year, about 7%-9%p.a.).
Total investment in equity 6.2% or Rs. 57.28 B

Will do a simple math ..... (I may be wrong)

Total return Rs. 924 B X 15% = 138.6 B

Approx return from govt securities Rs. 856 B X 9% = 77.04 B
Approx return from govt securities (RGS) Rs. 856 B X 10% (optimistically) = 85.6 B


Therefore, the balance Rs. 61.56 B came from equity investments of Rs. 57.28 B (or 53 B at 10% RGS)
then the return on equity investment should be;
@RGS 9%-------61.56 B / 57.28 B = 107.5%
@RGS 10%------53 B / 57.28 B = 91.7%
I noticed some of the forum members mentioned above that return on EPF's investment portfolio is only 4%, Can it be possible??

But, my calculations may be inncorrect as EPF's total return may include large amount of unrealized gains and we don't know how many years EPF already held those securities/shares (as time of investment is critical for this calculation), but I don't think actual return is as low as 4%.

@factfinder,
Most of us does not aware of 30% investment in Colombo Port Project. But, I heared there was a bid filed by SPEN with Singapore Port for Colombo South Port Development Project. No any idea whether it awarded to SPEN/Singapore Port or not. Also not aware of equity protion of SPEN in the venture. So, if you have any information in that regard, please share with us.


Thank you very much for adding a light to the discussion. I totally missed the point till you highlight (+ rep).

If overall return is around 15%, equity portfolio must perform exceptionally as you pointed out.

Please disregard my previous post (I don't want to delete it). Crying or Very sad

31EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 5:06 pm

Akalanka

Akalanka
Manager - Equity Analytics
Manager - Equity Analytics

i do look at the EPF/ETF fund activity in a different angel , by their investing the market has become more strengthened ,

just imagine if the fund act with on purely profit taking ambition it will just be same as what HNWI are doing , will absorb all the retailer money which definitely tarnish the image of CSE, dont you think so.?

Actually what we should concern is from where and from whom they are buying , at that point of view there may be lot of hidden agendas ..

32EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 5:17 pm

MoneyLover

MoneyLover
Senior Equity Analytic
Senior Equity Analytic
@wis wrote:SPEN's 30% investment in Colombo South Port Development Project was announced several years ago.
It would take at least another 2 - 3 years for the construction. But the timeline has been extending bit by bit.

There you are! Which means 30% SPEN's investment in Port Project is true.... as factfinder emphasised that may be the key motive of EPF's aggressive investment in to SPEN.

As EPF has shown its stong appatite on SPEN for last cupple of months/year, may be some HNWI or private funds trying to collect at the bottom and sell those to EPF as blooks (eg. 1 million shares each)

I can point out one of the worst investment decision of EPF, that is kerawalapitiya power project (unlisted).

33EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Thu Jun 30, 2011 6:11 pm

Think9

Think9
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@ all -

EPF is investing on GVT n listed securities for a longtime. arnt they ? im not sure, im just tryin to find some evidence.

http://sundaytimes.lk/990808/busm.html - this is in 1998 and this time also they ve bng investing. if so ur calculation will be changed. dont u think MoneyLover ?? .

imagine they re investin on TBs since 1998 with 5% gain each year? ( minimum ) And they ve invested on shares from longtime back. If so what happened to the gains they got from that ?

so basically what she says is for more than 13 years, EPF managed earned only 15% gain ?

From 15% im sure 11% from TBs. ( taking cumulative factor in to account and taking addition funds get added each year coz of new employments ) . Then the gain from the stocks comes to 4% .









34EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Fri Jul 01, 2011 3:59 pm

eeyohan


Manager - Equity Analytics
Manager - Equity Analytics
what do u think ... If EPF/ETF dont invest money in stock market ... think wat will happen to the market ...? Question

35EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Fri Jul 01, 2011 7:29 pm

Chabbi

Chabbi
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
my concern is does EPF & ETF looks long term for 10-20 years thy shd look for Best among best .......... but last couple of weeks & months thy were target one SPEN & AHUN Sad (mostly)

Now many of our member's knw wt is overvalued & wt is undervalued counters Smile Y cnt thy pump som of $$ to thr as well...

As i knw whn ppl trying to get funds back from EPF som said me it's hardest job thy faced Smile since now EPF doing diffrent role of ROBBIN HOOD Razz

bcz he steal frm RICHER & feed POORER.....these ppl Steal frm POORER & Feed RICHER Sad

Is thr any connection with Pension scheme & Investment in CSE ... bcz do had sufficient / excess funds (Millions of funds ??) to allocate in CSE ??? Bcz day by day thr ppl get some return frm EPF Fund wt thy saved for last 2-3 decades Smile

Quibit

Quibit
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
You should watch the movie 'The Inside Job' which clearly shows how all subprime debt were sold to pension funds. Same thing is happening in Sri Lankan Stock Market. High Networth Investors (HNWI) manipulates the stocks and takes some shares far beyond reasonable valuations. What is their ultimate goal or the objective. To place it with EPF or ETF. Coz they think that they could sell all the crap shares to these pension funds and get themselves a good profit. Why Pension Funds are not properly regulated in Sri Lanka? Why US investment banks were deregulated? You may find the same answer!

Have a look at some of the recent purchases these institutions had done. You will be shy and shocked to look at some of the valuations or the justifications made for purchases worth billions of rupees. Unlike in US, purchase of Sri Lankan equities by these pensions funds are not decided on the basis of a rating given by Rating agencies or advise of harvard or colombo university professors but by some mediocre stock brokers and middlemen who are involved in incentivizing buyers and sellers with kickbacks and frivolously supported by research reports prepared by analysts who had just passed out their advance level exams and paid salaries of Rs 25,000 per month and recruited by substandard brokering outfits.

This is another ponzi scheme. The bubble will soon burst on the face of pensioners and many private sector employees who are going to depend on their gratuity and EPF. Meanwhile middlemen and so called HNWI investors together with dealing brokers are walking away with millions of rupees.

These guys called themselves financial engineers. Some called themselves investors. But whatever they call themselves, they have only played rugby or cricket instead of proper higher education, or degree of any discipline which require as a investment banker. They are purpotedly building dreams for innocent people with the courtesy of pension funds. They are been honored and given many titles. It is sad coz tins bubble is going to burst one day. These so called financial engineers are not building bridges. They are buiding dreams for innocent people. They are living in other peoples dreams! When these dreams turn into nightmares only other people suffer.

Sri Lankan stock bubble will burst the day Sri lankan pension funds are properly regulated and stop buying these manipulated and overvalued stocks. We are only prolonging the certainty.

http://investors.lk/8627/Sri+Lanka%3A+Will+%91Kick+Backs%92+be+revealed+as+Auerbach+pulls+out+from+Asia+Securities%3F

37EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Fri Jul 01, 2011 10:14 pm

econ

econ
Global Moderator
Sri lankan pension funds are governed by Central bank fund managers.
But looking at current deals , they some time invest blindly. They might think that invest in blue chips is OK even those blue chip companies are massively over priced. Good example is pension fund investments in Aitcan spence. If you check any fundemental valuations it is easy to understand that EPF bought aitcan spence shares at very high prices paying high premium.However, there are many fundementallly strong growth potential shares available at lower prices. I think EPF is now trying to get in to management of these compnaies. That may be the reason they pay for premium prices and buy more shares. Good example is commercial bank. Moreover, it is unethical to buy banks shares by pension funds which is managed by central bank fund managers.

38EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Fri Jul 01, 2011 10:25 pm

econ

econ
Global Moderator
According to recent research on Sri Lankan pension funds, diversification should be promoted. However, main purpose should be to maximize expected utility of the pariticipants of pension funds not government indirect control of public companies.

39EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Sat Jul 02, 2011 12:47 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
@MoneyLover wrote:
@CSE1 wrote:Wednesday, June 29, 2011
EPF portfolio Rs 924 b by May 2011

Investments in corporate debt securities soon :

Ravi Ladduwahetty

The Employees Provident Fund (EPF) has an astronomical Rs 924 billion in its investment portfolio by end May 2011. Of the total investment portfolio of Rs 924 billion as at May 31, 2011, the Fund has invested Rs 856 billion in Treasury Bills and other government securities, accounting for 92.7% of the total portfolio, Central Bank’s EPF Superintendent Rupa Dheerasinghe told Daily News Business yesterday.

Of the remaining investments, there is Rs 57.28 billion or 6.2% of the total portfolio which is invested in listed and unlisted equities of which there is Rs 53 billion which accounts for 5.5% of the total portfolio in listed equities while the investment portfolio in unlisted equities is Rs 7.1 billion or 0.7% There is also 0.5% or Rs 4.62 billion invested in Reverse Repo.

“She said that the Fund was managing the monies of the people and was extremely vigilant in the manner of making the investments being acutely conscious of the security of the people some of whom have their lifetime’s savings in the EPF. “We are safeguarding the interests of the EPF members while giving them the best possible returns. We made an overall return of 15% for all our investments, she said.

“We are extremely careful when making the investments and our decisions are made by a fully-fledged team of Fund Managers who are acutely conscious of the market developments and fluctuations and their decisions are backed scientifically,” she said.

source - www.dailynews.lk

EPF's total investment portfolio is Rs 924 billion
The overall return for EPF is 15%.

Rs 856 billion or 92.7% has been invested in government securities which are zero risk but very low return (in last year, about 7%-9%p.a.).
Total investment in equity 6.2% or Rs. 57.28 B

Will do a simple math ..... (I may be wrong)

Total return Rs. 924 B X 15% = 138.6 B

Approx return from govt securities Rs. 856 B X 9% = 77.04 B
Approx return from govt securities (RGS) Rs. 856 B X 10% (optimistically) = 85.6 B


Therefore, the balance Rs. 61.56 B came from equity investments of Rs. 57.28 B (or 53 B at 10% RGS)
then the return on equity investment should be;
@RGS 9%-------61.56 B / 57.28 B = 107.5%
@RGS 10%------53 B / 57.28 B = 91.7%
I noticed some of the forum members mentioned above that return on EPF's investment portfolio is only 4%, Can it be possible??

But, my calculations may be inncorrect as EPF's total return may include large amount of unrealized gains and we don't know how many years EPF already held those securities/shares (as time of investment is critical for this calculation), but I don't think actual return is as low as 4%.

@factfinder,
Most of us does not aware of 30% investment in Colombo Port Project. But, I heared there was a bid filed by SPEN with Singapore Port for Colombo South Port Development Project. No any idea whether it awarded to SPEN/Singapore Port or not. Also not aware of equity protion of SPEN in the venture. So, if you have any information in that regard, please share with us.


Very good post broadening our view. Well Done. Also thanks to Academic, Think9, FactFinder for a good discussion without insults which I always appreciate.


Further to above facts I would like to add the below . Let me start by saying Long term vs Short term mind set is/ can be different. If you think Optimal and Short term as operative words then we can raise questions about their strategy.


1) In general EPF has not let us down over the years for some of us who benefited from it. Their annual return has been decent and during difficult time for which I am happy as I do not expect miracle returns form a fund like them. The question is what is the "Expectation" of a general EPF beneficiary who is not exposed to Stock Markets or the trends or their internal workings? Is EPF somehow meeting that expectations by balancing their overall returns ( not only selected equity buys)?



2) Yes EPF has made a few not optimal investments in short term ( not buying at the right time .
But we need to remember

i) for Long Term funds like EPF they do not have to dispose what they bought now. They can hold
until desired return is met maybe in 5 years. This is different to a Retailer mind set. [/b] They also
have bought stocks at lower prices which they can dispose now for profit. Long term mind set,
holding and disposal strategy is different. It may not be optimal in short term.

- When spen was trading around RS 300 in 2009 ( much before 1 to 15 split) maybe some thought
for prevailing market situation it was overvalued and maybe there were better shares to
invest. I reiterate we need to look from the mentality at that time not now. But if one bought at that
time for long term holding they could have disposed at 8-10 gain in 2010. ( I understand 2010 was
an exception but this is an example only)

Now if one bought SPEN at Rs 600 then they can ask why did you buy at Rs 600 when you could
have bought for Rs 300.

In the long term solid companies tend to pay off. ( depend on holding power) . For short term it looks
like a bad move if you only look at percentage gains, fundamental analysis and trends.

The real question is can someone say buying share at RS 230 now is a bad move in 5 years time?
Will there is a huge difference of Rs 90 ( Rs 140 vs Rs 230 which I agree is a large dip due to fundamental)
if the gain will be multiple times than that ? ( I am not saying it will happen but saying it could looking at past history patterns)


Another opposite example : Rememebr when SLIC sold CFIN for Rs 800 recently ? Some asked why do
they have to sell a undervalued share at that price. Answer : They bought long ago at much chepaer
prices and sold with significant gains after it satifies their strategy. No one will ask now, did they
buy CFIN overvalued when they purchased then.? People will say now oh they bough cheap.


ii) EPF seems to act sometimes in rescue missions in difficult market times. So from time to time
when they buy they would not get the best price or best from retailer point of view who has more flexibility.
Also negotiating and buying large quantities can require premium as opposed to buying from retail
stock market

But due to their long term long holding, averaging and disposing plan as I mentioned in i)
it appears to offset somehow.

iii) We also do not know about their cash availabilty/release periods. Someone said "best time to invest is
when some has money to invest"! (Ofcourse the circular question arises why do you buy a overvlaued share with that money?)





3) Also note
"Of the total investment portfolio of Rs 924 billion as at May 31, 2011"
- the Fund has invested Rs 856 billion in Treasury Bills and other government securities, 92.7%
- Rs 57.28 billion or 6.2% of the total portfolio which is invested in listed and unlisted equities
- 0.5% or Rs 4.62 billion invested in Reverse Repo.

With a claimed return of 15% and over 93% attributed to lesser risk investments we need to look at overall performance and and not isolate only the equity component. Somehow they seems to be balancing their return. Cannot say they are bad managers. We comments on Equity as we are knowledagle. But what about the overall management?


In summary :

Some people can again counter argue to what I said , isn;t it better to buy at Rs130 than RS 230 knowing it is overvalued. it is waste of public money. But large funds as EPF can act differently with different approaches than us. If still you say it is a waste now think say 5 years from now ? Can we say it will be bad investment ?

One thing I agree is that EPF should disclose more about their strategies ( not everything but enough for the public to get an understanding) as it is a Public Fund. Maybe it would clear this matter more than keeping it secret.

40EPF/ETF - Poor invesment strategies...  Empty Re: EPF/ETF - Poor invesment strategies... on Sat Jul 02, 2011 5:46 am

godswen

godswen
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Nice writing up there slstock!

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