More transparency urged in share market investments
Several employee-members of the Employees Provident Fund (EPF) are calling for more transparency in investments made by the Fund in the stock market, a Business Times (BT) poll this week shows.
The widely-responded poll, following media disclosures of the Auditor General’s review of the 2011 EPF annual report which shows a fall in the value of share investments, found 100 per cent of the respondents saying, ‘YES” to the question: Should there be more transparency about EPF investments and rates of return?
Asked whether the EPF should invest in the stock market, 53.8 per cent of the respondents said ‘Yes’ while 41.5 per cent gave a ‘No’ response. To the question, “Should EPF members be informed annually about investments and interest rates?”, 98.46 per cent said ‘Yes’. As of now, the Fund informs members every six months of their balance and interest rates.
The email poll, conducted over less than 24-hours on Thursday/Friday, attracted nearly 400 responses from workers, academics and business leaders. Most of the 53.8 per cent who agreed to investments in the stock market, said however that it should be based on sound fundamentals. “Investments should be strictly on strong share fundamentals; not in junk shares on political pressure,” one respondent said.
Another respondent said the motive of those making the investment decision appears “to be not in the primary interests of the workers to whom they owe a fiduciary duty but to showcase overall economic results and cosmetically window-dress national data to cover up their own shortcomings in mismanagement of public finances”.
He said the outcome has been to “enrich a few market manipulators at the cost of the life savings of wage earners”. Another respondent said that stakeholders don’t have “a clue as to where their funds are being channeled. Fortuitously the media highlights post the event, the unscrupulous activity of EPF investing in junk stocks on a regular basis for reasons best known only to those making investment decisions for vested interests”.
Below are some of the comments received in the poll:
On share marketinvestments:
- The EPF should not invest in the stock market as the risks are too much. Further there is evidence of share marked manipulations also. The Central Bank as the manager has lost its integrity and in any event it has inside information on the banks which they invest. This (could) lead to corrupt practices.
- The decision-making if it does so (invest) must be in the hands of stakeholders truly representing the workers whose balances/profits are at risk.
- Investments should be subject to a maximum limit, say, 20 per cent of the total assets.
- The EPF can certainly invest in a judicial manner in the share market, not the way it has been doing in the past 7-8 years. Savings of the innocent employees have been invested in loss-making ventures owned by cronies of the powers that be, knowing very well that such companies are not profit making ventures.
- Only in proven companies that have a strong track record.
- Provided the investment is done by professionals and within a clear and identified set of parameters and adequate control.
- The EPF should not invest in stock market because of government interference.
- It would be better if the investments are in government securities only.
On the need for transparency:
- The EPF must be audited and members provided a copy of the report.. No sufficient information is available as at now.
-The Central Bank has a bounden duty to inform the ‘actual owners’ of these funds of the investments made and the rates of return. The Bank has been doling out EPF funds to a “selected lot” as if it owns the funds.
On more information needs:
- Information should be available online 24/7.
- It should be mostly dividends and capital gains, rather than interest.
- EPF is the custodian of public’s retirement funds. Thus, they owe a duty to exercise due care and diligence in investing in equity. Investment committees need to implement a framework where equity research is undertaken prior to making significant investments.
- Investments by EPF are not new. I was working for a company which the EPF invested in as far back as 1980.
- Investments should be monitored by an independent body.