The Employees’ Provident Fund Organisation’s (EPFO) initial experience with stock markets has not been very encouraging. Starting August this year, the EPFO has invested in ETF a total of Rs 2,322 crore so far through SBI Mutual Fund. However, the value of its investment, as on November 3, stood at Rs 2,330.7 crore, translating into just 0.4% growth or an annualised 1.5%. While trade unions have cited the “low returns”, EPFO officials said since these investments were of a long-term nature, it would be premature to draw a conclusion on the merit of the pension funds’ ETF exposure.
EPFO investments are usually held till maturity. For 2013-14 and 2014-15, EPFO has been offering 8.75% interest to its subscribers. The rate may go up to 9% for the current fiscal.
“Trade unions have raised their concerns on low returns on investments in ETF. The issue will be discussed at the Finance Audit and Investment Committee (FAIC) meeting. This will be convened shortly,” EPFO’s Central Provident Fund Commissioner (CPFC) K K Jalan told reporters after meeting of its apex decision-making body, CBT, here on Tuesday. Labour minister Bandaru Dattatreya was also present in the meeting.
Jalan, who is also the Chairman of the FAIC, said the panel would put up its view for consideration of the CBT for further action. However, he added that returns on investment in ETF should not be judged on monthly basis, it should be left for scrutiny only after 5-10 years.
Out of the Rs 2,322 crore invested fund, 74.6% or Rs 1,734 crore has been invested in Nifty-based ETF and the balance in Sensex-based ETF. The primary aim of the retirement fund body to invest in the equity market was to maximise returns for its subscribers.
The CBT had in March this year decided to invest upto 5% of EPFO’s total incremental corpus or around Rs 6,000 crore in the ETF during the current fiscal. The retirement fund body has started investing with effect from August 6.
“We have been protesting against the move to invest in ETF since the time the idea was conceived. We have now proved to be correct. Who will take ETF money when banks are reportedly stashed with a huge ideal surplus? The returns are on expected lines,” said CITU’s President A K Padmanabhan.