EPFO might invest more in equity markets

A decision in regard to that will be taken at a meeting of Central Board of Trustees and a proper risk evaluation mechanism

Retirement Fund body EPFO may increase the quantum of investment in equity markets despite earning a negative return since it started the process in August last year.

A decision in regard to that will be taken at a meeting of Central Board of Trustees (CBT)  and a proper risk evaluation mechanism. The meeting is supposed to take place in the last week of this month.

“Naturally it will go higher. We have called portfolio managers and stock analysts and seen their presentation.  We will put forward their recommendations in the CBT meeting,” Union Minister for State Bandaru Dattatreya told Business Standard when asked if there will be any change in investment pattern by EPFO.

The Finance Ministry had last year notified a new investment pattern for EPFO, allowing the body to invest a minimum of 5 per cent and up to 15 per cent of its funds in equity or equity-related schemes.

However, the EPFO management decided to invest 5 per cent of its incremental deposits in ETFs only during the last year, the minister added.  But an analysis by EPFO found that it has earned a negative return of 9.54 per cent on its Rs 5,920 crore investment in exchange traded funds (ETFs) since August last year, prompting labour unions to demand rollback of the decision to park funds in stock markets.

The market value of investments of Rs 5,920 crore in the ETFs in the current fiscal was Rs 5,355 crore on February 29, 2016, as per an analysis of equity investment by the Employees' Provident Fund Organisation (EPFO).

When asked about it, the minister said that the decision to invest in ETFs was taken with a long term projection. “Less than one year as in the case of EPF is too short a time frame to evaluate performance of equity investment. At least 5 years is required,” he said

Trade unions opposed the move terming it as anti-worker. “"We have been opposing investments in the stock market. We will also oppose any such proposal in the meeting. We are custodian of poor workers money and safety of their provident fund is our concern,” said A K Padmanabhan, General Secretary, CITU.