Both retail and institutional investors may invest in Malaysia's local currency bond market. Malaysia's pension funds hold specific amounts of government bonds (particularly Malaysian Government Securities). Banks in Malaysia are dedicated to Islamic funds that invest in Government Investment Issues, while the major investors for Malaysian Treasury Bills are banks, finance companies, and insurance institutions.

Malaysian Government Securities (MGS) dominate the bond market and are primarily issued to the Employee Provident Fund (EPF) to meet its investment needs and to finance government expenditures. Eighty-five percent of MGS holders comprise the EPF, insurance companies, and commercial banks. Government Investment Issues are bought mostly by banks dedicated to Islamic funds. The key investors for Malaysian Treasury Bills are banks, finance companies, and insurance institutions.

Bank Negara Malaysia (BNM) is the largest shareholder of Cagamas bonds, which are also held by commercial banks, finance companies, and merchant banks. The corporate bond market has been a captive market for financial institutions.

Pension Fund

The Malaysian pension system comprises a series of provident funds, regulated by Bank Negara Malaysia (BNM). The Employees Provident Fund (EPF) is a significant investor in the bond market. It is the largest provident fund and accounts for over 85% of the total assets of the Malaysian provident fund system. EPF is required to invest 30% of its assets in MGS. The Social Security Organization (SOCSO), which provides benefits to workers through the Employment Injury Insurance Scheme and the Invalidity Pension Scheme, invests at least 40% of its funds in government bonds or in bonds issued by government-linked organizations. The Pension Trust Fund, which was transformed into the Retirement Fund under the Retirement Fund Act of 2007, also invests considerable amounts in Malaysian government bonds and other types of fixed income securities.

Insurance Companies

Private insurance companies dominate Malaysia’s nonbank financial sector. Since the 1997–98 Asian financial crisis, a merger program had reduced the number of insurers to 41 by the end of 2007.

The takaful sector is also experiencing rapid growth. Takaful, or mutual support, is the basis of the concept of insurance (solidarity) among Muslims where participants mutually agree to guarantee each other against defined loss or damage that may occur on any of them by donation from takaful funds. The number of takaful operators increased to eight by the end of 2007 from only three in 2003. The total takaful fund assets reached MYR8.8 million by the end of 2008 from MYR4.4 million in 2003.

Asset Management

The Securities Commission (SC) began liberalizing Malaysia's unit trust industry in 1997. Since then, the investment management industry has expanded. SC reported that total assets under management by licensed fund management companies in Malaysia increased by 44.13% to MYR236.98 billion by the end of 2007. Unit trust funds continued as the main source of assets under management, reaching MYR169.41 billion by the end of 2007. Other types of assets under management include funds from charitable bodies, corporate bodies, the Employees Provident Fund (EFP) and EPF contributors, government bodies and agencies, individuals, insurance companies, and private pension funds.