Negative returns: Panel pulls up EPFO for investing in falling market

By: |
October 22, 2020 8:00 AM

The parliamentary standing committee on labour has asked the Employees Provident Fund Organisation (EPFO) why the retirement fund body continued to invest in equity market, even when the market was falling in March-April.

Till March 31, 2020, the EPFO has put in Rs 1,05,825 crore in ETFs, but redeemed Rs 2,687 crore in 2017-18, leaving the holding as on March 31, 2020, at Rs 1,03,139 crore.

The parliamentary standing committee on labour has asked the Employees Provident Fund Organisation (EPFO) why the retirement fund body continued to invest in equity market, even when the market was falling in March-April. “Who took the call in this regard? Who was responsible for the decision? Give the details to us in writing,” committee chairman Bhartruhari Mahtab told the EPFO top brass and the labour ministry officials in a meeting on Wednesday.

With a return of (-)8.29% on its Rs 1.03-lakh-crore investment in exchange-traded funds (ETFs) till March 31, 2020, the EPFO’s expectations to benefit from equity market exposure are belied. The EPFO has been investing in ETFs since August 2015. Initially, the body started investing 5% of its investible corpus in stock markets. The proportion was raised to 10% in 2016-17 and 15% in 2017-18. The EPFO’s equity market exposure is to ETFs based on the Nifty 50, Sensex, CPSEs and Bharat 22 indices.

Till March 31, 2020, the EPFO has put in Rs 1,05,825 crore in ETFs, but redeemed Rs 2,687 crore in 2017-18, leaving the holding as on March 31, 2020, at Rs 1,03,139 crore. Of the total investment, so far, the highest portion of 70% was invested through the SBI ETF. The performance of the funds invested differed, but all were in the negative territory as on March 31, 2020. At (-) 24.36% value erosion, the CPSE ETF was the worst performer followed by Bharat 22 ETF at (-) 19.73%, UTI MF ETF at (-) 10.06% and SBI MF ETF at (-) 6.19%.

The parliamentary standing committee also asked the government to take decision expeditiously on enhancing the monthly minimum pension under the Employees’ Pension Scheme, 1995, run by the EPFO. “EPFO’s central board of trustees (CBT) had in August 2019 recommended raising the monthly minimum pension to Rs 2,000-3,000. They had sent their recommendation to the government. But, even after one year, no decision has been taken by the government so far. We have asked them to take the decision expeditiously,” Mahtab said.

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