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EPFO trustees to increase investments in ETF to 15%

Trustees of retirement fund body EPFO are likely to raise the investment limit in exchange traded funds (ETFs) to 15 per cent of the investible deposits, from 10 per cent at present, in the current fiscal.

The higher limit would help the Employees’ Provident Fund Organisation’s (EPFO) park around Rs. 15,000 crore in stock markets in 2017-18 as its investible deposits are close to Rs. 1 lakh crore annually.

“The EPFO’s apex decision making body, the Central Board of Trustees, headed by the Labour Minister, is likely to increase ETF investments to 15 per cent for this fiscal,” a source said.

CBT had met on April 12, where the proposal was discussed in the presence of Labour Minister, Bandaru Dattatreya.

It deferred the proposal as some of the employees’ representatives had pressed for vetting the move by EPFO’s advisory body Finance Audit and Investment (FAIC) committee.

They had also raised the issue of having a definitive exit policy to liquidate investments in government securities, ETFs and state loans to maximise returns for its members.

The source said that the FAIC meeting is being scheduled on May 19 where the EPFO would also be ready with the exit policy for its investments so that proportion of ETF investments can be raised smoothly at the CBT meeting on May 27.

EPFO had entered the stock market by investing 5 per cent in August 2015, which was raised to 10 per cent last year.

In 2015, the Finance Ministry had allowed private provident funds to invest 5-15 per cent of its investible deposits in equity or equity-linked schemes.

In view of the volatile nature of stock markets, EPFO had then decided to start with investing just 5 per cent of its over Rs. 1 lakh crore investible amount in ETFs.

EPFO has invested Rs. 18,069 crore in ETFs till February 18, 2017 and yielded a return of 18.13 per cent on these investments.

Earlier, Dattatreya had indicated that EPFO will increase its investment in ETFs in view of good returns.

The source said CBT can also enhance the wage ceiling for coverage under the EPFO schemes to Rs. 25,000 per month from existing Rs. 15,000.

It is estimated that this could bring in one crore more workers under the social security schemes run by the EPFO.

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