The Central Board of Trustees (CBT) is likely to give its nod for enhancement of the EPF exposure to Exchange Traded Funds (ETF) from the current level of 5% of the incremental deposits
The Central Board of Trustees (CBT), the highest decision-making body of Employment Provident Fund Organisation (EPFO), is likely to give its nod for enhancement of the EPF exposure to Exchange Traded Funds (ETF) from the current level of 5% of the incremental deposits. This decision may be taken during the CBT’s scheduled meeting on Friday.
Talking to media here, labour and employment minister Bandaru Dattatreya said there should not be any doubt that the investment in ETF would yield better returns in the long run. Under the current notified investment pattern, EPFO can invest up to 15% of its annual incremental deposits, estimated at around Rs 1.2 lakh crore, but the actual investment has remained at 5%.
The minister declined to divulge the likely limit. However, he said the limit would go up. “We will go step by step,” Dattatreya said.
Exchange Traded Funds, or ETFs, are funds that invest in various securities and are traded on stock exchanges.Enhancing the limit does not figure in the CBT’s meeting agenda, but the minister said it would be discussed.
Starting August 5 last year, EPFO’s R6,800-crore investment in the ETF has fetched a mere 1.68% yield till May. 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.
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 Rs 5,920-crore investment eroded by 9.54% to stand at Rs 5,355 crore.
Equity investments have always fetched better returns than debt instruments over a period of time.