EPF Achieves 48% Year-On-Year H1 2026 Investment Income Surge Amid Foreign Exchange Dynamics

[EPF Achieves 48% Year-On-Year H1 2026 Investment Income Surge Amid Foreign Exchange Dynamics]

This article first appeared in The Edge Malaysia Weekly on August 24, 2026 – August 30, 2026

THE Employees Provident Fund’s (EPF) 48% year-on-year (y-o-y) jump in total investment income to RM57.5 billion for the first six months of 2026 (1H2026) would be truly impressive if it did not include an unknown amount of unrealised paper gains that cannot be distributed as dividends to its 18.5 million members.

These mark-to-market “gains and losses on securities, arising mainly from foreign exchange rate fluctuations” pose a significant distortion to the fund’s portfolio performance when taken at face value, going by extrapolated figures, back-of-the-envelope calculations show.

Notably, foreign assets made up 39% of the EPF’s RM1.54 billion portfolio as at end-June 2026 — up from 36% as at end-March and 38.3% as at end-December 2025, but matching the 39% as at end-June and end-September 2025.

Income from foreign assets accounted for RM34.7 billion, or 60.3%, of total investment income in 1H2026. Of this, RM19.29 billion was in the second quarter of 2026 (2Q2026), up from RM15.36 billion in 1Q2026.

The ringgit had strengthened from around the 4.20 level against the US dollar as at end-September 2025 to about the 3.90 level in February this year. The greenback then gained strength, causing the currency pair to hit the 4.20 level in June before easing to about 4.05 currently. The ringgit had also strengthened from around the 4.90 level against the euro to the 4.50 level in March this year before retracting to about 4.70 currently. The Hong Korean dollar is pegged at about 7.80 to the US dollar.

The EPF did not provide a breakdown of its foreign assets in its 1H2026 statement dated Aug 17. It had yet to release its 2025 annual report at the time of writing. Its 2024 annual report was released in late November 2025.

We know, however, that 43% of the EPF’s foreign assets were denominated in the US dollar in 2024, 14% in euro, 6% in Hong Kong dollar, 5% in yen, 4% each in pound sterling and Singapore dollar, 3% each in baht, Taiwan dollar, rupium and won, 2% in Australian dollar and 10% in other currencies. In 2023, 39% of the EPF’s foreign assets were in US dollar, 15% in euro and 6% in Hong Kong dollar.

EPF CEO Ahmad Zulqarnain Onn again cautioned members against extrapolating the quarterly results.

“Similar to the first quarter, we continued to front-load income during the second quarter as market and geopolitical risks remain elevated. While equity markets have supported performance in the first half of the year, members should temper expectations as such market opportunities may not repeat itself in the second half of the year,” he said in an Aug 17 statement. “Our focus remains on delivering sustainable long-term returns, backed by a resilient portfolio.”

In its 1Q2026 release dated May 19, Ahmad Zulqarnain said the first quarter outperformance “is unlikely to be repeated in subsequent quarters”.

Outsized equities contribution

The fund’s 2Q2026 total investment income of RM29.77 billion was about 7.4% above the RM27.73 billion in 1Q2026 and 44% above the RM20.61 billion in 2Q2025. As these numbers include an undisclosed amount of paper gains that cannot go into the dividend pool, they tell members surprisingly little about the eventual dividend for 2026.

Against the EPF’s total investment assets of RM1.54 trillion as at end-June 2026, the RM57.5 billion total investment income in 1H2026 implies about 3.7% returns over six months, or a 7.5% annualised return. The latter, incidentally, matches the 7.5% annualised shareholders’ return target that Malaysia’s six government-linked investment companies (GLICs) — including the EPF — are nudging key investees to deliver annually under the GEAR-uP programme (2024-2028). This does not necessarily mean a 7.5% dividend rate for EPF members.

Returns on foreign investments will likely continue to outpace that for domestic investments, even though the exact degree of outperformance is distorted by the unrealised paper gains.

Equities accounted for 71.8%, or RM41.28 billion, of the RM57.5 billion total investment income in 1H2026, while only accounting for 47.5% of total investment assets as at end-June 2026.

While past performance shows strong equities and foreign income usually corresponds with a stellar dividend payout, it should be noted that there was previously better visibility on the size of unrealised gains or losses.

Equities’ contribution to total investment income is also likely boosted by the unknown unrealised paper gains. Conversely, that probably means some understatement of contributions from its other investment asset classes.

Headline numbers show fixed income accounted for 23.8%, or RM13.67 billion, of 1H2026 total investment income while making up 44% of total investment assets as at end-June 2026. Real estate and infrastructure accounted for 2.6%, or RM1.49 billion, of 1H2026 total investment income while making up 5.5% of total investment assets as at end-June 2026. Money market instruments contributed 1.8%, or RM1.06 billion, of 1H2026 total investment income while making up 3% of total investment assets as at end-June 2026.

The EPF did not provide specific investment return figures for each asset class in the quarterly release. Neither did it give details of the impact of ringgit movements on total investment returns so far.

It did say that it “capitalised on strong global equity markets while maintaining a disciplined long-term investment approach” and that a “strong recovery in the global equity markets during the quarter provided opportunities for fund managers to capitalise on the gains and contributed to the income growth”.

“Investor sentiment also improved as concerns over energy prices eased, and confidence in the artificial intelligence investment supercycle remained strong,” the fund said in the Aug 17 statement. “Malaysian Government Securities (MGS) and equivalents, loans and bonds continued to provide stable and resilient returns, serving as a key defensive component of the portfolio amid market volatility,” it added.

The EPF also said returns for its real estate and infrastructure and money market instruments were “in line with return expectations for these asset classes”, without providing a benchmark.

We also know that Conventional Savings (SK) make up 81.4%, or RM46.79 billion, of the RM57.5 billion total investment income, with the remaining RM10.71 billion, or 18.6%, attributed to Shariah Savings (SS). However, the relative returns are unknown given that the portfolio split is also unknown, though more members are likely to have increased shariah-compliant savings after the SS dividend matched that for SK in 2024 and 2025.

In spite of the unknown portion of paper gains, it would seem that there is growing confidence in the EPF generating decent returns for members. Voluntary contributions continued to gain momentum, increasing to RM14.15 billion as at end-June, from RM8.83 billion as at end-March 2026. Meanwhile, the number of Malaysian formal sector members contributing above statutory rates increased 13.9% y-o-y to 204,450 in 1H2026, and grew from 232,305 in 1Q2026. Adding 441,846 new members in 1H2026, the EPF had 18.5 million members as at end-June, of which 10.95 million were active members (being those who had made at least one contribution the past 12 months).

Given the EPF CEO’s repeated caution and lack of clarity on paper profits, The Edge withholds its dividend prediction for the full year, even though the EPF looks to be on track to deliver a dividend of at least 5% for 2026 and have a good chance of delivering even a 6% dividend if it continues to do well in the second half. The fund releases its 3Q performance report between mid-November and mid-December.

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