The Employees Provident Fund (EPF) has unveiled the first and largest shariah private equity fund in the world, with a total allocation of US$600 million (approximately RM2.43 billion).
Designed in the form of direct and co-investment separately managed accounts (SMA), the new fund will be supervised by three private equity fund managers, namely BlackRock, HarbourVest Partners LLC, and Partners Group AG. Briefly, SMAs are portfolios of assets that are managed by professional asset management firms, with the ability to customise the strategies employed for each individual asset account. It differs from pooled funds, such as mutual funds, where investments are shared by a group of investors – thereby removing the benefit of customised portfolio management.
According to a statement by the EPF, the provident fund has earmarked US$200 million for each of the three SMAs supervised by the managers. The SMAs will be managed via a global mandate that focuses on direct and co-investment strategies into growth and buyout transactions.
Aside from that, these SMAs are also structured based on either a wakalah structure, or a combination of wakalah and murabahah structures. They will be subjected to shariah investment guidelines, with Amanie Advisors Ltd (Dubai) and ZICO Shariah Advisory Services serving as advisors to ensure that all investments are shariah-complaint.
The EPF further clarified that the investment period for these SMAs will stretch between 2021 to 2025. Meanwhile, the fund term is slated to last between 2021 to 2031, subject to further extensions with the EPF’s consent.
“We are proud to be the first institutional investor to establish a shariah-compliant private equity direct and co-investment fund, and this is the largest of its kind globally, with a global investment mandate. The EPF has been working on this initiative since 2018 as we seek to diversify our investment portfolio to ensure we can provide sustainable returns to our members,” said the outgoing chief executive officer of the EPF, Tunku Alizakri Alias.
For context, the private equity arm of the EPF has a global fund exposure that amounts to 106 active investments with a total commitment of US$12.05 billion. These include funds with strategies covering growth, buyout, as well as middle- and large market capitalisation. Meanwhile, the top three regions in which the EPF has invested under private equity mandates – as of the second quarter of 2020 – are North America (42%), Europe (21%), and Greater China (12%).