Malaysia’s Employees Provident Fund (EPF) has announced it is looking to expand its investments in infrastructure assets with steady cash flow.

In this respect, the EPF, which traditionally invests in equities and fixed income bonds, is looking at investing directly in infrastructure assets ranging from power plants to ports and highways as long as the investments yield nothing less than 10% returns.

According to sources, EPF had allocated some 3% of its total fund size to be invested in infrastructure assets.

With almost MYR690 billion (US$156 billion) under management, the EPF already has invested in three toll highways and a waste-management operations. The three highways are PLUS Expressway, where it has a 49% stake, the Cheras-Kajang Highway and the New North Klang Straits Bypass Expressway.

Recently, the pension fund acquired a 40% stake in Phase I and II of the Duta-Ulu Kelang Expressway (Duke), built by Ekovest. The fund will invest a total of MYR1.13 billion (US$255 million) for the stake in the highway. Of the sum, MYR921 million (US$209 million) will be paid in cash with the rest to be placed in an interest-bearing account. A sum of MYR60 million (US$13.4 million) will be paid when Duke’s phase II is completed. The remaining MYR149 million (US$34 million) will be released when the highway achieves an IRR of 11.5%.

The sale of the 40% is expected to be completed in the first quarter of 2017.

In the initial stages, traffic is expected to grow at 10% annually. Phase I of Duke is in operation since 2009, while Phase II is expected to start operating in early 2017. The concession has a period of 53 years.

Ekovest has already started the construction of Phase III of Duke, known as the Setiawangsa-Pantai Expressway.

After Duke, the next infrastructure likely to be under the EPF is the Eastern Dispersal Link (EDL) expressway in Johor Baru.The EDL connects traffic from the North-South Expressway to the Customs, Immigration and Quarantine centre in Johor Baru. It is now owned by Malaysian Resources Corp Bhd.