EPFO approves diversification of investments to up to 5% of annual deposits

The Central Board of Trustees (CBT), the apex decision-making body of the Employees’ Provident Fund Organisation (EPFO), took some important decisions on Saturday pertaining to investments. 

The central board of the EPFO, at its 229th meeting, today approved investing up to 5% of the annual deposits in alternative investments including infrastructure investment trusts (InvITs), reported Money Control. 

Central board of trustees of EPFO has given in- principle approvals to invest in public sector invits and bonds, though on a case-to-case basis, to be decided by Finance Investment and Audit Committee (FIAC), reported Economic Times. 

The decisions will mean EPFO is diversifying its investments into asset classes that will enhance the yield on investments but also carry fair amount of risks.

So far, the EPFO has invested only in Exchange Traded Funds (ETFs) through ETF manufacturers (SBI-Mutual Fund and UTI-Mutual Fund) and not in individual shares.

The equity investment of the EPFO was Rs 31,025 crore in 2020-21, Rs 32,377 crore in 2019-20 and Rs 27,743 crore in 2018-19.

In April 2021, the labour ministry had notified changes in EPFO investment options to include alternative investment funds.

An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.