The Employees Provident Fund Organisation (EPFO) has earned 7.45 per cent returns from its equity investments since August last year due to an uptick in the capital market, Union Labour Minister Bandaru Dattatreya said.
A status report on equity investments has been sent to financial, investment and audit committee of EPFO and a final call on increasing equity investments will be taken in the next central board of trustees meeting to be held later this month.
“World over, the investments in exchange traded funds are going up. The investment in exchange traded funds will benefit in the longer run and lead to an increase in the rate of return we offer to our subscribers,” Mr. Dattatreya said at a press conference after the 213 Central Board of Trustees (CBT) meeting of the EPFO. He said the EPFO has invested around Rs.7,000 crore in exchange traded funds since August 2015.
Labour Secretary Shankar Aggarwal said the yield on investment in equity till date is “almost equal” to return on government securities investment. “Soon, we will take a decision on how much the equity investments should be increased,” the labour minister, who is also the Chairman of the CBT, said. He said a special CBT meeting may be held between 18 and 22 July to discuss the various proposals including increasing equity investments.
The EPFO started investing five per cent of its corpus in equities beginning August last year. It can invest up to 15 per cent in equity and its related instruments such as exchange traded funds.
Trade unions were not in favour of equity investment as they feared higher risk being involved due to market fluctuations. “We should not look at fluctuations. Ultimately, the interest rate in the long-term will be gainful. We are keeping the workers’ interest in mind but we are not going ahead in a hurry. We are moving forward cautiously,” Mr. Dattatreya said.
UTI to manage equityUTI will manage the equity investments of Employees’ Provident Fund Organisation (EPFO) along with State Bank of India (SBI), Central Provident Fund Commissioner VP Joy said.
“We have decided to rope in UTI to manage our exchange traded fund investments along with SBI. We have not yet taken a final call on the proportion of funds that each of them will handle,” Mr. Joy said. The finance investment and audit committee of EPFO had proposed that UTI Mutual Fund be allocated 10 per cent of total ETF investments of EPFO and the rest 90 per cent be handled by SBI Mutual Fund.
The asset management companies in the race were: HDFC Mutual Fund, ICICI Prudent Mutual Fund, Reliance Mutual Fund, UTI Mutual Fund, SBI Mutual Fund and Kotak Mahindra Mutual Fund.
“Considering the fact that ETFs as an investment vehicle are relatively nascent in the Indian market, it would be prudent to invest only with asset management companies with majority ownership under public sector,” according to official documents.
