EPFO trustees likely to raise ETF investment limit to 15% on 27 May
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New Delhi: The trustees of retirement fund body Employees’ Provident Fund Organisation (EPFO) are likely to raise the investment limit in exchange traded funds (ETFs) to 15% of the investible deposits, from 10% at present, in the current fiscal.
The higher limit would help the EPFO park around Rs15,000 crore in stock markets in 2017-18 as its investible deposits are close to Rs1 lakh crore annually.
“The EPFO’s apex decision making body, the Central Board of Trustees, headed by the labour minister, is likely to increase ETF investments to 15% for this fiscal,” a person privy of the development said.
CBT had met on 12 April, where the proposal was discussed in the presence of labour minister Bandaru Dattatreya. It deferred the proposal as some of the employees’ representatives had pressed for vetting the move by EPFO’s advisory body Finance Audit and Investment (FAIC) committee.
They had also raised the issue of having a definitive exit policy to liquidate investments in government securities, ETFs and state loans to maximise returns for its members. The person said that the FAIC meeting is being scheduled on 19 May where the EPFO would also be ready with the exit policy for its investments so that proportion of ETF investments can be raised smoothly in the CBT meeting on 27 May.
EPFO had entered the stock market by investing 5% in August 2015, which was raised to 10% last year. In 2015, the finance ministry had allowed private provident funds to invest 5-15% of its investible deposits in equity or equity-linked schemes.
In view of the volatile nature of stock markets, the EPFO had then decided to start with investing just 5% of its over Rs1 lakh crore investible amount in ETFs. The EPFO has invested Rs18,069 crore in ETFs till 18 February 2017 and yielded a return of 18.13% on these investments.
Earlier, Dattatreya had indicated that the EPFO will increase its investment in ETFs in view of good returns. The person said the CBT can also enhance the wage ceiling for coverage under the EPFO schemes to Rs25,000 per month from existing Rs15,000. It is estimated that this could bring in one crore more workers under the social security schemes run by the EPFO.