The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO) will meet on November 20 to discuss, among others, untapped available investment options aimed at reaping benefits from the buoyant equity market.
As per the notified investment pattern, the EPFO can invest its incremental deposits, amounting to around Rs 1.8 lakh crore a year, between 45%-50% in government securities, 35-45% in debt instruments, up to 5% in short-term debt instruments, between 5-15% in equities and up to 5% in asset-backed, trust-structured and miscellaneous investments.
The asset-backed, trust-structured and miscellaneous investment category was modified in April this year to give way for investment in units issued by Category I and Category II Alternative Investment Funds (AIF) regulated by the Securities and Exchange Board of India (Sebi).
The already permissible category under this option includes commercial mortgage-based securities or residential mortgage-based securities, units issued by real estate investment trusts (REITs), asset-backed securities, and units of infrastructure investment trusts (InvIT) regulated by the market regulator. The EPFO has not exercised these options so far.
Last month, the EPFO’s fund managers and advisors made a presentation before the FIAC members on the opportunities for such investments, returns and risks.
In the next meeting of the CBT, a tripartite body involving government, workers and employers’ representatives, the discussion will centre around how the return on investments can be maximised using the available options which will be less risky and at the same time, return-accretive.
“This is needed to ensure better returns for the subscribers. The higher returns will be possible only when invest in newer instruments for investment,” said a senior government official. For the last two fiscal, the EPFO has been paying 8.5% interest to its subscribers on their accumulated deposits in the employees’ provident fund (EPF). This is higher than many small savings schemes.
The CBT will also discuss the ways and means for diversification funds in corporate bonds and public sector bonds.
“We will look at investments which is less risky like the government-entity sponsored InvITs such as that of PGCIL and NHAI. At the same time, the authority should not miss the opportunity to earn higher returns in the buoyant market,” he said.
Another source said even as EPFO has the option to invest up to 15% of the incremental deposits in equities, just around 5-7% of it is getting invested in equities. This will also form a part of the agenda for discussion in the CBT.