Keen to find takers for its soon-to-be launched exchange traded fund (ETF) of listed public sector firms, the finance ministry has approached the country?s largest manager of retirement savings that holds a corpus of over Rs 5 lakh crore.

?The finance ministry has approached the Employees? Provident Fund Organisation (EPFO) to discuss the possibility of investing in the PSU- ETF,? a senior government official said.

The move comes at a time when the department of disinvestment is finalising the contours of the ETF that is likely to start operations early next fiscal.

It also coincides with the EPFO?s decision to adopt the investment pattern for pension and provident funds that was notified in 2008 as it tries to improve returns for its subscribers.

Although the 2008 investment pattern allows the EPFO to invest up to 15 per cent of the corpus in equities, the risk-averse organisation has chosen to stay away from the provision.

Instead the Central Board of Trustees of the EPFO has sought to defer the move until sufficient safeguards are in place to ensure the safety of capital and minimum assured returns for its subscribers.

It has also sought appropriate investment and accounting policies and a separate monitoring mechanism for exempt trusts.

?The ETF would consist of shares of blue chip listed PSUs. So investing in it would be less riskier than a direct exposure to individual stocks. Further, the common theme of government ownership across diversified stocks would give investors much more safety and comfort,? the official said.

An exchange traded fund is an investment fund, which is traded on the bourses like shares, and be bench marked to an index on the stock exchange.

According to initial plans, the PSU-ETF is expected to have a corpus of about Rs 5,000 crore and include stocks of firms including ONGC, BHEL and Power Finance Corporation.

The finance ministry has already appointed ICICI Securities as the adviser for creation of the fund and has issued a revised expression of interest for appointing an asset management company.

Former secretary for financial services DK Mittal had also written to the EPFO in November last year on the issue. Pointing out that the EPFO manages to give returns only in the range of 8.5-9.5 per cent to its subscribers, Mittal had said, ?When coupled with more than 8.5 per cent inflation rate or double digit inflation rate, it results in negative returns.?

For better returns

* The finance ministry?s move also coincides with the EPFO?s decision to adopt the investment pattern for pension and provident funds that was notified in 2008 as it tries to improve returns for its subscribers

* The 2008 investment pattern allows EPFO to invest up to 15% of its corpus in equities

* The retirement funds manager has been risk-averse and stayed away from the provision

* The EPFO sought to defer the move until sufficient safeguards are in place to ensure the safety of capital and minimum assured returns for its subscribers

* The finance ministry says that the exchange traded fund comprising blue-chip PSU stocks would be a safer investment than direct exposure to individual stocks