EPFO appoints 4 fund managers for Rs 3.5-lakh cr corpus

Retirement fund manager EPFO today decided to appoint four fund managers — SBI, HSBC AMC, Reliance Capital and ICICI Securities Primary Dealership -- for managing its huge corpus of Rs 3.5 lakh crore for three years beginning September 1, 2011.

The decision was taken here by EPFO's apex decision making body Central Board of Trustees (CBT), headed by the Labour Minister.

"The CBT has approved appointment of four fund managers -- SBI, HSBC AMC, Reliance Capital and ICICI Securities Primary Dealership for managing EPFO funds for three years from September 1, 2011," Labour Minister Mallikarjun Kharge told reporters here after the trustees' meeting.

Employees' Provident Fund Organisation (EPFO) has put a rider that it could cancel the appointment on failure of the fund managers to provide adequate returns in the first year.

"We have taken a decision that for one year we will see their performance. After completion of one year, based on their performance they will be asked to continue," Kharge explained.

Asked about the reason for dropping ICICI Pru as EPFOs fund managers this time, Kharge said, "Whatever criteria fixed by the expert committee, in that ICICI securities has come (selected), not ICICI Pru".

When asked again why the best performer was not appointed this time, the minister said, "May be....But if you ask more money then...".

ICICI Pru has quoted a service fee of 48 paise for managing Rs 10,000 as compared to 3 paise by the the ICICI Securities Primary Dealership.

Earlier, during the two-and-half-year tenure from September 17, 2008 to March 31, 2011, ICICI Pru had provided highest yield of 8.72% followed by HSBC AMC (8.64%), SBI (61%) and Reliance Capital (8.57%) against the benchmark yield of 8.52%.

In the latest round of bidding, Reliance Capital quoted a fee of 4 paise per annum for managing Rs 10,000, and was the second lowest bidder after ICICI Securities Primary Dealership.

SBI has quoted a price of Re 1 per Rs 10,000 whereas HSBC AMC's rate was 36 paise.

Among the four managers, SBI would manage biggest chunk of EPFO fund with 35% of corpus followed by ICICI Securities Primary Dealership at 25%, an official said. HSBC AMC and Reliance Capital will manage 20% each.

As many as 10 companies had shown interest in managing the corpus of the EPFO, but only five were shortlisted -- SBI, HSBC AMC, Reliance Capital, ICICI Securities Primary Dealership and ICICI Pru.

The other companies which were in the race for managing the EPFO funds were Kotak Mahindra AMC, Securities Trading Corporation of India, UTI AMC, Birla Sun Life AMC and Franklin Templeton AMC.

The EPFO had appointed multiple fund managers for the first time in July, 2008, for earning better rate of return on deposits for its 4.72 crore subscribers.

Before that, SBI was the sole fund manager for the retirement fund body since its inception in 1952.