EPFO drives nearly 52% of equity ETF inflows in 2022-23, shows data

Retirement fund allocates Rs 53,000+ crore to equity ETFs

The retirement fund body, the Employees’ Provident Fund Organisation (EPFO), constitutes the majority of flows into equity exchange-traded funds (ETFs).

Data shared by the government in Parliament reveals that one of the world’s largest social security organisations invested Rs 53,081 crore into ETFs in 2022–23 (FY23), accounting for more than 50 per cent of the total gross inflows into equity ETFs in the previous financial year (FY23).

Data from the mutual fund industry estimates the gross inflows into equity ETFs at Rs 1.02 trillion in the same period.

The EPFO primarily invests in ETFs replicating the National Stock Exchange Nifty50, S&P BSE Sensex, CPSE, and Bharat 22 Indices. Investments have increased each year since 2018–19, resulting in a total deployment of just over Rs 2 trillion at the end of July 2023.

In comparison to the gross inflows into all non-gold ETFs, the share of EPFO investments has ranged from 26 per cent to 34 per cent, according to data from the Association of Mutual Funds in India.

The EPFO initiated its equity investment through ETFs in 2015-16 with a 5 per cent exposure. The equity investment limit was raised to 10 per cent in 2016–17 and further to 15 per cent in 2017–18.

As of March 31, 2022, the EPFO had allocated 8.7 per cent of the Rs 18.3 trillion to ETFs and 91.3 per cent to fixed-income instruments.

The EPFO has been increasing equity allocation in an attempt to counterbalance the declining yields in the debt space.

For FY23, the EPFO announced an interest rate of 8.15 per cent for Provident Fund deposits.