GLOBAL: Pension fund managers the Employees Provident Fund (EPF) and Kumpulan Wang Persaraan (KWAP) from Malaysia and Jaminan Sosial Tenaga Kerja (Jamsostek) of Indonesia have said that their plans to increase investment in Sukuk are being hampered by a shortage of investment-grade Sukuk.
The pension funds are seeking more high-grade Sukuk in a bid to diversify their investments, which must hold investment-grade debt.
Ahmad Norhisham Hassan, the fixed income director at KWAP, which runs Malaysia’s civil service scheme, has said that the company, which plans to raise its holdings of Islamic securities, needs to look offshore for Sukuk because of local scarcity.
This is despite Malaysia’s standing as among the few investment-grade sovereign issuers; alongside Bahrain, Indonesia, Qatar, and the UAE.
Badlisyah Abdul Ghani, CEO of CIMB Islamic, noted that this is because the pension funds are growing faster than sales of Sukuk, adding that despite large Sukuk issuances from Malaysia, the Islamic debt market remains small compared to the value of investable funds.
Jamsostek also plans to increase its Sukuk holdings going forward; with Islamic securities currently accounting for around 3% of its IDR105 trillion (US$11.5 billion) portfolio.