Tuesday, October 28, 2008

Throwing Good Money After Bad?

Last week the Government announced that it has doubled the amount of money available to Valuecap Sdn Bhd (Value *who?) to buy undervalued stocks to RM10bil. At last a positive move to move the market but wait a minute, where is the money coming from?

*Valuecap is a fund management firm established in 2003 to invest in the stock market. It is jointly owned by Khazanah, PNB and Retirement Fund (Incorporated).

The bombshell - The Government would borrow RM5bil from the EPF. Another national service! It claimed that EPF will make a profit based on the past performance of Valuecap which has grown its portfolio from RM5bil initially to RM8bil now.

(Not sure about the claim as past performance does not guarantee profitability, it is only use as an indication!)

Perhaps make public the detailed financial statement before the RM5 billion is channeled. If indeed it is in the black with RM3bil profit, it should feel proud to disclose the book. Show us which counters it has invested in. Fair deals, we only want transparency - if they want to use our money. Without it, how can we hope to inspire confidence?

The other question: why use EPF funds, which is public money held in trust? What kind of return can the EPF expect to get and how does that expected return compare with more stable, less risky investments – opportunity costs?

Another article on EPF was posted on 5 September. Please read EPF 8th Largest Fund in the World.

No comments: