EPF/ETF - Poor invesment strategies...

Think9

Think9

Senior Manager - Equity Analytics

Posts : 449
Join date : 2011-06-09

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 9:16 am; edited 1 time in total (Reason for editing : spellings)

Sun Feb 19, 2012 10:34 pm by aj · Sun Feb 19, 2012 10:34 pm by aj

Remember what happened to the rupee value. The central bank were defending the currency with foreign reserves. But you can't do that every day, every week, every month. There is a limit. So what happens when the EPF buying stops...
Anyway who cares about the pension money of the fools.

Mon Feb 20, 2012 7:56 am by econ · Mon Feb 20, 2012 7:56 am by econ

we need independent central bank. current central bank under kabral is just a another government department.

Mon Feb 20, 2012 9:54 am by WildBear · Mon Feb 20, 2012 9:54 am by WildBear

econ wrote:we need independent central bank. current central bank under kabral is just a another government department.

Yes, now we have come to the real point. Kabral is a chartered accountant by precession. He may be suitable to be come the auditor general, but sure not to be the head of central bank. Sri Lanka has suffered and suffering a lot with wrong people in wrong position.central Bank governor should be derived within the bank staff it self or with experience in a body like IMF.He should be an economist rather than a accountant.what to do, poor Sri Lanka
,
Sad

Mon Feb 20, 2012 12:46 pm by rijayasooriya · Mon Feb 20, 2012 12:46 pm by rijayasooriya

අර්ථසාධක අරමුදල්
කොටස්‌ වෙළෙඳපොළේ ආයෝජනය කළේ නෑ
- මහ බැංකු අධිපති කියයි

ශ්‍යාම් නුවන් ගනේවත්ත

පසුබෑමට ලක්‌ වී ඇති කොටස්‌ වෙළෙඳපොළ බේරා ගැනීමේ අරමුණෙන් සේවක අර්ථසාධක අරමුදල්, කොළඹ කොටස්‌ වෙළෙඳපොළේ ආයෝජනය නොකළ බව ද එය මුළුමනින්ම අසත්‍ය චෝදනාවක්‌ බව ද ශ්‍රී ලංකා මහ බැංකුවේ අධිපති අජිත් නිවාඩ් කබ්රාල් මහතා ඊයේ (19 දා) "දිවයින" ට පැවසීය.

සුදුසු ආයෝජන තීරණ මත අර්ථසාධක අරමුදල් කොටස්‌ වෙළෙඳපොළේ ආයෝජනය කරන්නේ එම අරමුදලේ සාමාජිකයන්ට ඉහළ ප්‍රතිලාභ ලාබදීමට බව ද මහ බැංකු අධිපතිවරයා අවධාරණය කළේය.

කොටස්‌ වෙළෙඳපොළ බේරාගන්න අර්ථසාධක අරමුදලේ සල්ලි යොදන බවට මහ බැංකුවට නැගී ඇති චෝදනාව පිළිබඳව "දිවයින" කළ විමසුමකට පිළිතුරු දෙමින් මහ බැංකු අධිපතිවරයා මේ බව කීවේය.

"මේක සම්පූර්ණ අසත්‍ය චෝදනාවක්‌. නියමිත වෙලාවේදී අපි කොටස්‌ මිලදී ගැනීම සහ විකිණීම කරනවා. සමහර කොටස්‌ දිගුකාලීන ආයෝජන තීරණ මත වගේම තවත් සමහර කොටස්‌ කෙටිකාලීනව ගනුදෙනු කිරීමේ අරමුණෙන් මිලදී ගන්නවා. අපේ ඉහළ දැනුමක්‌ තිබෙන ආයෝජන උපදේශකයන් විසින් එම ආයෝජන තීරණ ගන්නවා. ඒක කරන්නේ පසුබෑමට ලක්‌වී ඇති කොටස්‌ වෙළෙඳපොළට තල්ලුවක්‌ දෙන්න නොවේ. මිල වැටිච්ච වෙලාවෙදී කොටස්‌ ගන්න ඕන. එය නුවණට හුරු කටයුත්තක්‌ බව ද මහ බැංකු අධිපති අජිත් නිවාඩ් කබ්රාල් මහතා තවදුරටත් "දිවයින" ට කීවේය.

http://www.divaina.com/2012/02/20/news32.html

Tue Feb 21, 2012 9:02 am by enthush · Tue Feb 21, 2012 9:02 am by enthush

WildBear wrote:Interesting abstracts of a research analysis done by Verité Research on investment of Sri Lankan State controlled pension funds-

ETF has made a return of 26 percent on equity investments while EPF returns stand below 4 percent an Analysis by Verité Research shows that Employee’s Provident Fund’s (EPF)management of equity investments have made low returns in comparison to stock market growth for the corresponding period and in comparison to returns made by the Employees Trust Fund (ETF).

EPF’s investments in the stock exchange has underperformed the All Share Price Index (ASPI), and earned only one-fourth of what it would have earned if the same investment had been placed with the usual no-risk-low-return government securities, where 95percent of the EPF funds are placed.

The investment of the EPF funds is under the supervision of the Monetary Board of the Central Bank.

Historically, the main investments by the Fund have been in Government Securities. This is not without its problems as the EPF has been used as a cheap source of borrowing for the government, at the expense of reasonable returns for the workers.

A study by the Institute of Policy Studies titled “Designing Retirement-Income-Security Arrangements:

Theory, Issues and Applications to Sri Lanka” (de Mel, 2000)showed that the EPF returns had been negative in real terms over a workers career.In 2009, the Monetary Board invested 97.1 percent of the EPF Fund in Government Securities, with a return of 15.70percent, while in 2010, it invested 94.1percent with a return of 14.60 percent. At the same time there was a move to increase the investment in the stock exchange.

In 2009, only 1.3% of the Fund (Rs.9.8 billion), was invested in equities; but in 2010, there was a four-fold increase with 5% of the fund (Rs.43.7 billion) being invested in equities.

The Central Bank has explained this increased investment in equities on the basis that there was a need to diversify investments as returns to government securities were on the decline. The explanation, however, is contradicted by the outcome: the return to the EPF’s investment in equities in 2009 was 3.53percent and in 2010 it was 3.81percent.

If the same investments had been kept in short and long term government securities at the average yield, the EPF would have earned almost 4 times as much it did by investing in equities. In 2009 post civil war, the Sri Lankan stock exchange boomed, and in 2010 it became the best performing stock exchange in the world. The percentage increase of the ASPI in these two years was 125percent and96percent. In that light, how the EPF managed to garner returns of just 3.53percent and 3.81 percentis puzzling in the extreme, and should require a public accounting.

The Employees Trust Fund (ETF), which is managed by the Commissioner of Labour, has also made investments in equities. In contrast to the EPF’s return of 3.81percent the ETF made a return of 26percent on their investment in 2010.The loss to workers as a result of mismanagement of the fund’s investments in equities can be calculated at Rs. 71.2 billion in 2010 alone. More than the absolute amount, the scale of loss is a cause of concern. Where the quantum of investment had an expected market return 73.9 billion based on the ASPI of the stock exchange in 2010, the EPF earned only 1.7 billion: an adverse ratio of 43:1 (that is, if EPF had simply distributed its investment proportionately across all shares in the stock market without any thought or analysis, it would have earned 43 times more than it actually earned with its expert investment decisions).

The stock market is what economists call a “constant sum game”.

That is,the total long term benefits available from the stock market are equal to the actual increase in dividends fromthe underlying stocks. All deviations from this underlying increase in value are “zero sum”: that is, one person’s loss is another person’s gain. Therefore, the huge underperformance of the EFP investment is not without beneficiaries.

http://www.sundayobserver.lk/2012/01/29/fin01.asp

oh what a joke is this?? who writes these rubbish articles?????
problem in this country is journalists can write any nonsense and be untouchable.

ETF is talking in terms of unrealized gains which when i worked out on EPF portfolio is around 43%.
end of 2010 market value was about 60 B and cost about 40 B.

Wed Feb 22, 2012 12:28 pm by **gamaya** · Wed Feb 22, 2012 12:28 pm by **gamaya**

The stock market is what economists call a “constant sum game”.
That is,the total long term benefits available from the stock market are equal to the actual increase in dividends fromthe underlying stocks. All deviations from this underlying increase in value are “zero sum”: that is, one person’s loss is another person’s gain. Therefore, the huge underperformance of the EFP investment is not without beneficiaries.

So one day may be there could be an investigation as to who are the beneficieries?

Sat Mar 03, 2012 7:02 pm by Redbulls · Sat Mar 03, 2012 7:02 pm by Redbulls

THURSDAY, 01 MARCH 2012 16:53
The Ceylon Federation of Labour (CFL) has expressed concern on the future viability of the Employees Provident Fund (EPF) if the government continues to ‘fiddle‘with the hard earned savings of workers to bolster the Colombo Stock Market.

CFL President T.M.R. Rasseedin said in a statement that in recent times because of the government's own doings the Colombo bourse dipped to an all time low in transactions and the Government has rescued it from the doldrums by taking easy recourse of using EPF monies to artificially prop up the stock market.

According to its 2010 Report the EPF, has increased its investment in the Colombo Stock Market to Rs 43.7 billion in 2010 from Rs. 9.8 billion in 2009, the highest-ever increase in investment in equities recorded so far. It is a 400% increase in equity investment which is above the permissible limit, the statement said. "We demand the authorities to publish details of investments made in listed and unlisted equities so that the public would know whether the Government has helped out its business cronies by purchasing their shares far above the real value," Mr Raseedin was quoted as saying.
The statement said that the Government must realise that the monies in the EPF belong to workers and not to the Central Bank or the Monetary Board and they cannot be permitted to gamble with the savings of workers.

To ensure prudent investment of these funds that the unions proposed the setting up of a Tripartite Consultative Committee in the draft EPF Amendment Act. The proposal was accepted and the amendment was in fact drafted with the express provision that "The committee shall be charged with the functions of discussing and exchanging views with the Central Bank and the Monetary Board in matters relating to the appropriation and investment of the monies lying to the credit of the fund and other functions as may be prescribed by the Minister for the purposes of this Act."

Strangely this provision has been omitted from the amendment of the EPF Act that was passed recently. The CFL urged the authorities to set up a mechanism that would enable representatives of workers and employers to oversee and monitor the operations of the Fund. "We call upon all trade unions to agitate for such a mechanism as the actions of the fund managers are increasingly becoming unacceptable and threaten the future viability of the fund," the CFL said.
http://sundaytimes.lk/index.php?option=com_content&view=article&id=16496:calls-for-a-monitoring-mechanism-for-the-epf-&catid=79:analysis&Itemid=565

Sat Jun 02, 2012 4:43 pm by Quibit · Sat Jun 02, 2012 4:43 pm by Quibit

This article provides loads of information about poor investments strategies of EPF.

Tue Jun 05, 2012 1:24 pm by **Chinwi** · Tue Jun 05, 2012 1:24 pm by **Chinwi**

I do not think investing in stock market is a bad thing for a fund like EPF, IF it is done genuinely.
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මේගොල්ල දැන්ද මේවා දන්නේ ?
ගිය අවුරුද්දේ අපි කොච්චර මේ forum එකේම මේ ගැන කතා කළාද ?
අඩු ගානට එකතු කර ගත්තට පස්සේ නග්ගල EPF එකට විකුණන හැටි ; අපි එකතු කර ගන්න කන් EPF එකේ අපේම යාලුවෝ නිදාගෙන ඉන්න හැටි එහෙම. :-)