EPFO's market investment will be on incremental corpus

Govt states 5-15% of EPFO incremental corpus for this year to go into ETFs

The Union government on Friday clarified that 5-15 per cent of the rise in the yearly corpus of the Employees' Provident Fund Organisation (EPFO) will be invested in equities, in the form of exchange-traded funds (ETFs) only.

EPFO's total corpus is a little over Rs 6 lakh crore. An official said the incremental corpus was estimated at around Rs 80,000 crore for 2014-15. This means up to about Rs 12,000 crore could find its way into the stock markets in this year.

In 2013-14, EPFO's incremental corpus stood at Rs 70,000 crore. This is likely to rise to Rs 80,000 crore in 2014-15. In five years, as the incremental corpus will rise annually, EPFO could see investment up to Rs 1 lakh crore in ETFs.

Business Standard had reported on Thursday that the Union labour ministry had notified this new investment pattern for EPFO, allowing it to invest 5-15 per cent of its corpus in ETFs.

The government is likely to bring a separate notification for organisations exempted from the ambit of EPFO.

On March 2, the finance ministry had suggested a revised pattern of investment for non-government provident funds, superannuation funds and gratuity funds, effective April 1. The labour ministry, on the recommendation of the central board of trustees, highest decision-making body of the EPFO, notified this pattern.

However, as reported earlier, the labour ministry could choose to invest no more than five per cent of EPFO's incremental corpus by the end of 2015-16.

The new pattern will allow the organisation to park 45-50 per cent of its funds in government securities, 35-45 per cent in debt securities and term deposits of banks, up to five per cent in money market instruments, 5-15 per cent in equity and related instruments and five per cent in asset-backed securities and units of infrastructure investment trusts.