The Labour Ministry is planning to send teams of experts to other countries to study the investment pattern of provident funds in stock markets, Union Minister Bandaru Dattatreya said today. The EPFO cumulatively invested Rs 21,559 crore in Exchange Traded Funds (ETFs) up to March 31, 2017, with 10.6 per cent return on it to Rs 23,845 crore, he said. “There is a proposal to invest 10 to 15 per cent (of the annual investible amount) in the ETFs during the current year. “The proposal will be taken up in the next meeting of the Board of Trustees. There should not be any objection to the proposal as the returns are good in ETFs in the long run,” the Labour Minister said.
The retirement fund body’s current investment limit in ETFs is 10 per cent. “What I want to do is to send special teams to Germany, Japan, Australia and South Korea and study the investment patterns in ETFs in their exchanges. In most of the countries, the investments in ETFs are in excess of 30 per cent,” Dattatreya told PTI.
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“For example in Singapore, most of the Provident Fund amounts are invested in ETFs,” the minister said. A senior official from the Ministry of Labour and Employment said once the Board of Trustees approves the proposal, the EPFO will invest up to 15 per cent in ETFs for the next 2-3 years and analyse the pros and cons.
Investible income is the net income of the EPFO from the investments it has already made in various forms, and also fresh contributions. Last year the investible income was about Rs 1.50 lakh crore, he said. Based on the analysis, they may approach the Finance Ministry to allow the investment cap to move up, he said.
The EPFO, which started investing in ETFs in August 2015, currently manages a corpus of over Rs 8 lakh crore. Dattatreya also said the EPFO will soon be signing an agreement with Hudco for implementing its housing scheme. As per the scheme, members of the pension body are eligible for credit-linked subsidy of up to Rs 2.2 lakh on interest under the Pradhan Mantri Awas Yojana, Dattatreya said. The EPFO has a target of financing one million houses in the next two years, he said.