1. EPFO exposure to ETFs may be hiked from 5% of incremental deposits

EPFO exposure to ETFs may be hiked from 5% of incremental deposits

Labour and employment minister Bandaru Dattatreya on Tuesday hinted that Employees’ Provident Fund Organisation’s (EPFO) exposure in the exchange traded funds (ETFs) for the current fiscal may be hiked from the current level of 5% of the incremental deposits.

By: | New Delhi | Published: May 25, 2016 7:49 AM

Labour and employment minister Bandaru Dattatreya on Tuesday hinted that Employees’ Provident Fund Organisation’s (EPFO) exposure in the exchange traded funds (ETFs) for the current fiscal may be hiked from the current level of 5% of the incremental deposits.

Addressing the media on the ministry’s two-year achievements, the minister said the exposure will have an “increasing trend” in the current fiscal, but declined to quantify any figure, saying the issue would be discussed in the next meeting of the Central Board of Trustees (CBT), the highest decision-making body of the retirement fund body.

Starting August 5 last year, EPFO’s `6,800 crore investment in the ETF so far has fetched a mere 1.68% yield. The investment in Nifty and Sensex has been in the ratio of 70.05:25.95.

SBI Mutual Fund manages EPFO’s investment in the equity market. The fund house was appointed the “ETF manufacturer” for the 2015-16 financial year. However, its term has recently been temporarily extended for three months till June 30. A source in the labour ministry said SBI Mutual Fund might continue as the fund manager for the current fiscal as well.

The policy of EPFO’s investment in the ETF had drawn a lot of flak from a section of trade union representatives in the CBT, who accused the government of playing with the poor workers’ money. In fact, till February-end, the market value of EPFO’s `5,920-crore investment eroded by 9.54% to stand at `5,355 crore.

The minister, however, sounded optimistic, saying investment in equity should be long-term in nature.

Equity investments have always fetched better returns than debt instruments over a period of time. According to the notified pattern of investment, EPFO can invest in equity and related investments 5 to 15% of the incremental deposits, which roughly stands at `1.2 lakh crore.

Meanwhile, the minister said the labour reform proposals are aimed to ensure ease of doing business, employment generation and get rid of the cumbersome labour laws. The work on amalgamating 44 extant central labour Acts into four codes is also in progress.

The minister said 95% work on the Code on Industrial Relations and Code on Wages have been concluded, while work is almost halfway through for the two other codes — Code on Social Security and Safety and Working Conditions.

Apart from proposals that include empowering establishments employing up to 300 workers to lay off without government approval from the current 100, the government also proposes to make forming trade unions tougher and bar outsiders to take leadership role in the trade unions in the organised sector through the Code on Industrial Relations. The Code on wages seeks to make national minimum wages mandatory.

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Tags: EPFOETF
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