EPFO to invest in bourses from July

To pump Rs 5,000 cr this fiscal in ETFs

EPFO to invest in bourses from July

 The Employees’ Provident Fund Organisation (EPFO) will start investing in stock markets from next month. The investments this fiscal would be to the tune of five per cent of the incremental deposits, which would amount to Rs 5,000 crore. The investments are to be made in exchange traded funds (ETFs).

The investments in the share market are being done to implement the decision of the Central Board of Trustees of EPFO on March 31. Though the trade unions are opposing the decision, the Labour Ministry has decided to go ahead.

Until now, EPFO's market exposure was limited to government and corporate bonds. It earned a return of 9.22 per cent on its investments last fiscal year, and paid 8.75 per cent to its subscribers.

An EPFO official said the fund annually invested nearly Rs 1 lakh crore ($15.72 billion), out of which it could put nearly Rs 5,000 crore ($785.95 million) into equities between July and March.

The EPFO has started investing with a minimum amount of five per cent of annual investments only despite the mandate of the ministry for an investment of up to 15 per cent. The ministry has also allowed investing in equity or equity-related schemes. However, the fund organisation decided to kick off by investing in exchange-traded funds.

The EPFO will invest in “shares of body corporates listed on the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) which have market capitalisation of not less than Rs 5,000 crore as on the date of investment”. The EPFO can also invest in those mutual funds which are regulated by the Securities Exchange Board of India (Sebi) and have minimum 65 per cent of their investments in shares of body corporates listed on the BSE or the NSE.

A global biggie

With more than $100 billion of assets from some 80 million members, the EPFO is one of the world’s largest. It will begin by investing in Indian exchange traded funds, with the goal of earning higher returns.

“We are starting with one per cent in July and by the end of this (fiscal) year it will go up to 5 percent” of annual investments, Labour Minister Bandaru Dattatreya said in an interview late on Wednesday.

Dealers in Mumbai said news of the imminent entrance of EPFO into equity funds helped the and stock markets on Thursday, which closed at a one-month high led by a rally in housing stocks. To win support for this and other politically unpopular labour reforms, Modi has agreed to make it easier for casual workers to enter EPFO, a move opposed by some businesses which will have to contribute more.

The new rules allowing EPFO to invest in shares may also help Modi hit an ambitious target of raising nearly $11 billion through selling stakes in state-run firms and minority stakes in private companies this fiscal year, a senior government official said.

A Giant Awakens

EPFO has more than $100 bn in  assets from some 80 mn members
The fund annually invests nearly Rs 1 lakh cr ($15.72 b)
 It earned 9.22% on its investments last fiscal, and paid 8.75% to subscribers.
The fund could hike equity exposure to 15% of annual
investments in coming years

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