EPFO to raise ETF investment limit beyond 5%

22 August 2016

Retirement fund body Employees Provident Funds Organisation (FPFO) is planning to raise the proportion of its investments in exchange traded funds (ETFs) from the present 5 per cent and a final decision on the quantum for current fiscal would be taken very soon, union minister of labour Bandaru Dattatreya has said.

The decision follows a steady increase in returns on investments in ETFs to over 12 per cent.

EPFO's investments in ETFs stood at Rs7,468 crore as of 31 July this year while the market value of this investment has grown to Rs8,372 crore, which shows a positive return of 12.10 per cent, the minister said.

"An emergency meeting of Central Board of Trustees (CBT) of EPFO will be convened soon and a final decision on how much (increase in quantum of investments in ETF) percentage will be taken after taking opinion. Earlier, we had gone for 5 per cent. Now, how much we have to increase I will take a decision after the emergency meeting," PTI quoted Dattatreya as saying.

A decision on ETF investments is likely within next 15 days, the minister added.

As of now, EPFO is allowed to invest a minimum of 5 per cent in ETFs and up to 15 per cent of its funds in equity or equity-related schemes. EPFO had started investing up to five per cent of its investible deposits in ETFs in August last year.

Labour unions, however, has sought government guarantees as a precondition for increasing the quantum of investments in ETFs.

SBI Mutual Fund and UTI Mutual Fund will manage the corpus of the retirement fund in ETFs, he said, adding that the tenure of SBI Mutual Fund as ETF manufacturer for EPFO had lapsed on 30 June.

However, SBI Mutual Fund and UTI Mutual Fund will restart EPFO investments in ETFs, according to the minister.

"We have not stopped investments in ETFs during the lapsed period and taken care of investment pattern. In the meanwhile, (the period after it expired) funds amounting to Rs 900 crore have been parked/invested in Liquid Mutual funds and such funds earned around 7 per cent approximately.

"This amount will be withdrawn and invested in ETFs by both SBI Mutual Fund and UTI Mutual Fund," the minister added.

 search domain-b