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Updated on: Friday, May 31, 2019, 11:34 PM IST

EPFO to invest 5% of total invest in ETFs; expects over 8.75% returns

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Mumbai : Marking its maiden entry into stock market, retirement fund body Employees’ Provident Fund Organisation announced its first equity investment through Exchange Traded Funds benchmarked to key indices Sensex and Nifty and promised to invest more than the current limit of Rs 5,000 crore from the next year.

The largest provident fund in the world by assets held and beneficiaries is likely to extend the exposure to equity markets up to 10% in the next financial year, and 15% later.

The first investment, announced here by Labour Minister Bandaru Dattatreya in the presence of top market participants, would be made through SBI Mutual Fund’s two index linked ETFs — one to the BSE’s Sensex and the other to NSE’s Nifty. The return from the ETF investment will be more than the 8.75 per cent the EPFO offers to subscribers now, he said.

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“We expect that the return be given to 4.67 crore subscribers of EPFO, which started investing 5 per cent of its incremental fund of Rs 1,00,000 crore, to be more than the existing return of 8.75 per cent,” the minister told reporters.

Out of the total available funds, 75% will be invested in SBI Nifty ETF and 25% will be invested in SBI Sensex ETF, managed by SBI Mutual Fund.

On the investment pattern, Central PF Commissioner K K Jalan said, “While 75 per cent of the incremental fund will be invested in NSE ETF, the remaining will be made in the BSE ETF. We may also look at investing in the CPSE ETF, whenever it happens.” He also hinted that the investment in equities may go up to Rs 7,000-8,000 crore in case some of the other organisations like ONGC, whose fund is also managed by the EPFO, too decide to invest into equities.

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With the possible increase in investment limit to 15 per cent of total incremental funds from next year, EPFO, which holds 8.5-trln-rupee corpus, could become the second largest state-run investor after insurance giant LIC, which put around Rs 50,000 crore of funds every year in equities.

SBI MF managing director and chief executive Dinesh Khara said, “It is a very good substitute when compared to FII. Long-term retirement money coming to equity market will bring stability to the market in the long term.”

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Published on: Friday, August 07, 2015, 12:12 AM IST
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