Upward Graph: EPFO’s investments in ETFs rise five times in six years

By: |
November 22, 2021 8:10 AM

As of March 31, 2021, the EPFO had a total of Rs 1,22,986.40 crore of investment in ETFs, which had a notional value of Rs 1,60,017.14 crore, reflecting 14.67% returns.

However, it has redeemed ETF units twice — once each in 2020 and 2021.

The Employees’ Provident Fund Organisation’s (EPFO) annual fresh investment in exchange traded funds (ETFs) has gone up by nearly five times in the last six years to stand at Rs 32,070.84 crore in 2020-21.

The higher investment is in sync with higher contribution it received from its subscribers and proportionate allocation. As per the notified investment pattern, the EPFO is permitted to invest 5-15% of its annual incremental deposits in equity and related instruments.

In 2015-16, the first year of investment, the EPFO invested Rs 6,578 crore in ETFs of the Nifty and the Sensex. In 2016-17%, the threshold was raised to 10% and subsequently, from 2017-18 fiscal, the retirement fund body is investing 15% of its annual incremental deposits in ETFs.

Between August 5, 2015 and March 31, 2021, the EPFO’s gross investment in ETFs was Rs 1,37,895.95 crore. The amount of fresh investment in ETFs is on the rise each year from Rs 6,578 crore in 2015-16 to Rs 14,981 crore in 2016-17, Rs 14,790 crore in 2017-18, Rs 27,974.25 crore in 2018-19, Rs 31,501.06 crore in 2019-20 and Rs 32,070.84 crore in 2020-21.

However, it has redeemed ETF units twice — once each in 2020 and 2021. The two exercises, through which the EPFO redeemed units with cost of acquisition of Rs 12,223.03 crore, generated Rs 7,350 crore capital gains.

Capital gains were used for paying interest to its subscribers for their accumulated deposits with the employees’ provident fund (EPF). EPFO paid 8.5% rate of interest for both 2019-20 and 2020-21 to its subscribers.

As of March 31, 2021, the EPFO had a total of Rs 1,22,986.40 crore of investment in ETFs, which had a notional value of Rs 1,60,017.14 crore, reflecting 14.67% returns.

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