SOCSO New Investment Strategy

Malaysia’s Social Security Organisation (Socso) has been beefing up its investment department in a bid to achieve superior investment performance to enable sustainable defined benefits for its social protection schemes.

Socso has total assets under management of RM25.8bil as at June 30, 2017, and it aims to achieve returns of at least 5% to 6% under its new five-year Investment Strategy Blueprint.

Chief executive officer and director-general, Datuk Dr Mohammed Azman Aziz Mohammed, said Socso had recently reviewed its investment policy and diversification strategy, and brought in a sizeable experienced investment personnel.

“We have diversified our investment. Previously, we just invested in equities, fixed income and money market, and now we have diversified into property and private equity.

“We managed to get the approval from the Ministry of Finance (MoF) to add the allocation for different mandate of investment. The governance is there...we cannot go beyond that,” he told Bernama.

Socso was set up in 1971 under the Ministry of Human Resources (MOHR), formerly known as Ministry of Labour, to provide social security protection to all employees or workers in Malaysia.

Azman said with a strong team, Socso hoped it could do more in terms of investment.

“We need returns. We cannot just rely on the contributions alone. The fund is growing but it does not increase in line with the payment we have been giving out for the members’ benefits and compensation.

“That’s why we need to diversify, we need to improve the returns and have more income in order for us to sustain for longer years in terms of the fund that we have.”

He said the organisation’s trust fund concept was pooling of resources and sharing of risks.

It did not have to pass the returns that it received but it now needs better returns because the base is getting bigger, he added.

“Our recipients are long-term recipients. Every year, you keep adding to the list of recipients that you have. And, every three to five years, we will review the benefits that we provide to the insured person.

“We will enhance, we will improve the payment, based on the actuarial study, consumer price index and cost of living and so on, and that’s why we need more returns to ensure we provide better benefits to the insured person based on the economic situation,” he added.

While the current key performance indicator for the investment department based on the blueprint is to get returns for Socso of between 5% and 6%, Azman said he hoped the fund could do more in the years to come, while remaining conservative on its capital preservation and adherence to high corporate governance and practices.

Azman had also answered a question on the new Section 74a, which was inserted in the Employees’ Social Security Act 1969, that had raised some eyebrows due to its impact on the security of the fund.

The new provision allows Socso to establish or take over any company with the approvals from both the MOHR and MoF.

“The reason why we amended that section was for us to run our rehabilitation centre in Melaka as a private entity.

“That rehab centre, meant for our own insured persons, is considered as another benefit within Socso. Those who become disabled or those who cannot work because of health reasons, we will put them at the rehab centre.

Azman said the process of converting the rehabilitation centre into a ‘Sendirian Berhad’ company would be completed soon.

But while stating the conversion of the rehabilitation centre in Melaka into a private entity as the main reason, Azman did not reject the idea of using the same clause for another private equity exercise.

“That is actually the main reason for the amendment but we do not know what’s in store for the future,” he said.