The Finance and Investment Panel of the Employees’ Provident Fund Organisation (EPFO) has cautioned the government on increasing investments in equity and has advised it to examine returns for a few more months.
“Some of the Central Board of Trustees (CBT) members have opposed investments in exchange-traded funds (ETFs),” said Prabhakar J. Banasure, a member of financial investment and audit committee of the EPFO which met on July 22.
“Looking at the market fluctuations at present, we have advised that we need to examine the returns on equity investments for a few more months before taking a final call.”
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He, however, said that Labour Minister Bandaru Dattatreya, who has called a special CBT meeting to discuss equity investments related proposal on Tuesday, will take a final call on the matter.
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. Till June 30, EPFO has invested Rs.7,468 crore in ETFs, earning an absolute return of 7.45 per cent so far, Mr. Dattatreya said in a written reply in Lok Sabha last week.
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Mr. Dattatreya wants an increase in equity investments and in the last Central Board of Trustees meeting, held earlier this month he had sent a status report on returns on equity investments to the Finance, Investment and Audit Committee.
“The 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. Soon, we will take a decision on how much the equity investments should be increased,” Mr. Dattatreya had said.
The Labour Ministry said that the yields on investment in equity till date were equal to return on government securities investment.