With the largest retirement fund EPFO beginning to invest in capital markets for the first time ever, regulator Sebi has pitched for similar investments by other pension funds as well.

Welcoming the EPFO decision to invest five per cent of its incremental deposits into capital markets through Exchange Traded Funds (ETFs), Sebi chairman U K Sinha said other pension funds should also look at investing in markets.

“This is a very good development that five per cent of the Employee Provident Fund Organisation’s incremental deposits will come into capital markets. A decision has been taken by the EPFO, which is the largest pension fund, but there are other government pension funds also,” Sinha said.

Giving examples of Coal Miners Fund and Assam Tea Planters Fund, Sinha said all such funds should now look at investing in the capital markets.

For EPFO also, Sinha said the investment cap should increase further from five per cent going forward.

“But, first let us see the experience with this five per cent and then they can look at further increasing the percentage,” Sinha said, while adding that the government must be complemented for EPFO’s decision to start investing in capital markets after a long-running debate.

EPFO has a huge corpus of about Rs 6.5 lakh crore, out of which it has an incremental deposit of about Rs 1 lakh crore.

Incremental deposits

For now, the EPFO has decided to invest five per cent of the incremental deposits, amounting to about Rs 5,000 crore, through ETFs this year, beginning with Sensex and Nifty- benchmarked ETFs of SBI Mutual Fund.

This cap could be increased to 15 per cent next year.
Besides EPFO, there are an estimated 1,500 other pension funds in the country with overall corpus of close to Rs 2 lakh crore. Under the current regulations, these funds can also invest up to 15 per cent of their incremental deposits in the equity and equity-related instruments.


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