EPFO to invest in equities from Aug 6

EPFO to invest in equities from Aug 6

Initial investment corpus to be Rs 5K cr

EPFO to invest in equities from Aug 6

The Employees' Provident Fund Organisation (EPFO) will begin investing in the stock market from August 6, with an initial corpus of Rs 5,000 crore.

Addressing a function organised by ASSOCHAM, Central Provident Fund Commissioner K K Jalan said the investment would be made through the Equity Traded Fund (ETF) route.
ETFs are like Mutual Funds, but traded daily.

Jalan said the Finance Ministry has taken the decision to allow the EPFO to invest up to 15 per cent of the incremental deposit in the stock market.

However, the Central of Board of Trustees has given it the limit of investing only 5 per cent of the incremental deposit.

Talking about the retirement fund's investment strategy, Jalan said: “We are long-term players, and usually, the equity market behaves in a positive manner in the long term. There has always been positive return, but naturally that risk element of equity going down is always there, but it is low because only 5 per cent of the incremental deposit is being invested.”

He added: “Most pension funds invest in equity, and that is why we decided to do so. We feel our decision over the years will be a good thing for our stakeholders.”

He also said the EPFO would eventually have to come up with 3-4 models and give options to its stakeholders. “We have taken initiatives, and perhaps now we will come to that stage in a year or two where we can give people options,” he said.

The EPFO has already sent a proposal to the Labour Ministry to cap premature PF withdrawal at 75 per cent of an employee's total deposit. The rest 25 per cent would be paid to the subscriber at the age of 58 years.

The step has been taken to make more funds available to the EPFO for investment.

Currently, EPFO subscribers can withdraw the entire amount prematurely by showing he or she has been unemployed for two months.