EPFO to consider hike in ETF investments next week

Retirement fund body EPFO is likely to consider a proposal to increase proportion of its investments in exchange traded funds (ETFs) in its trustees' meet on July 26.

"The proposal to increase quantum of investments in exchange traded funds is likely to come up in the the meeting of the Central Board of Trustees (CBT) of the Employees' Provident Fund on July 26," a senior official said.

EFPO, at present, is investing 5% of investible deposits in ETFs despite opposition by labour unions.

"Labour Minister Bandaru Dattatreya has already indicated earlier that EPFO will enhance the proportion of its investments in ETFs which will eventually be increased to 12% of investible deposits every year," the official said.

EPFO started investing in ETFs in August last year. However, trade unions have been opposing the decision.

Total amount invested by EPFO in ETFs is Rs 7,468 crore as on as on June 30 2016. The absolute return on the investment so far is 7.45 per cent.

Labour Ministry had notified a pattern of Investment on April 23, 2015, which allows investment in equity and related investments from 5 to 15%.

However, the CBT had decided to invest only 5% in ETFs to start with last year.

"There will be a CBT meeting. We may take a decision on the quantum of investments to be made in ETF. We are in discussions with BSE and National Stock Exchange also. The investment will certainly increase (over last year).

"The Finance Ministry gave us clearance to invest from 5 to 15%. It is a long-term investment. It may up to 10 to 12% also depending up on the market conditions. We expect the markets would be stabilised in the long run. Markets also need money," Dattatreya had said.

Last week, the minster had also told that as on June 30, the EPFO invested Rs 7,468 crore in two index-linked ETFs (Exchange Traded Funds) -- one to the BSE's Sensex and the other to NSE's Nifty -- and as of now the market value of the investment stood at Rs 8,024 crore with 7.45 per cent yield.

This fiscal the investible deopoits of the EPFO could be over Rs 1.35 lakh crore.