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Malaysian pension fund to buy $263m highway

The $159bn institution is looking to ramp up investments in infrastructure, with a strategic allocation of 10% to alternatives.

Employees Provident Fund of Malaysia has agreed to buy a 40 percent stake in a 34km highway with a 54-year concession in Malaysia from developer Ekovest Berhad for 1.13 billion ringgits ($262.5 million; €242.6 million). 

Ekovest’s subsidiary Nuzen Corporation will retain its 60 percent stake in the concession company that owns the Duta-Ulu Kelang Expressway. The highway project comprises two phases, the first of which is already in operation. The second phase, due to complete in the first half of 2017, is expected to double the project’s traffic volume.   

Ekovest intends to use 400 million ringgits of the sales proceeds to repay debt and distribute up to 245 million ringgits back to shareholders. It has also earmarked 485 million ringgits for general corporate operations. The transaction is expected to close by the first half of next year. 

The construction company said the divestment is in line with its strategy to monetise mature infrastructure assets in a bid to fund the expansion of the entire division. It added that the deal marks the start of a partnership between the two parties which will see them pursue collaborations on other potential investments in the future. 

“Similar to all of EPF’s other infrastructure ventures, we focus on several key criteria which include a strong regulatory framework, an operational track record and other ongoing macroeconomic factors,” said Dato’ Mohamad Nasir Ab Latif, deputy chief executive of EPF, adding that the investment meets the fund’s requirements. 

“With infrastructure assets providing steady yields, we foresee that the EPF will continue to explore opportunities in the infrastructure space in its commitment to generate real rate of returns for its members. The EPF focuses on investments that offer stable cash flows, are inflation-linked in nature, and that which best align with our risk-reward criteria.” He added. 

EPF, with 690 billion ringgits in assets under management, has a 10 percent allocation to real estate and infrastructure but had only invested a combined 22 billion ringgits in the two asset classes as of end of 2015, according to its annual report.