Retirement fund body EPFO will kick start a routine of investing in the stock market on August 6 with an initial corpus of around Rs 5,000 crore. It would be invested through ETFs. The new investment settlement for Employees’ Provident Fund Organsiation (EPFO) in April permitted 5 percent to 15 percent of investments to be made in Equity schemes. However, the EPFO management has decided that it would invest only 5 per cent of its incremental deposits in ETFs during the current fiscal. Finance Ministry norms allow investing up to 15 per cent (of incremental deposits) but CBT allows to invest 5 per cent (in ETFs) to start with.
Some of the trade union members on the board of EPFO‘s apex decision making body Central Board of Trustees (CBT) have been opposing the decision to park funds in volatile stock market. While addressing an ASSOCHAM conference EPFO’s Central Provident Fund Commissioner K K Jalan said that they will make their first investment in equity (market) on August 6 in Mumbai. The Labour Minister (Bandaru Dattatreya) will preside over the function.
During the April-June period, EPFO’s monthly incremental deposit was around Rs 8,200 crore. Thus it will have around Rs 410 crore at its disposal to invest in ETFs each month. The EPF investments would be for a long term since equity have always given a positive return in long-term. The risk element of going down of equity is always there. That risk element is very less because it is only 5 per cent of incremental market (deposit) and even the investment of Rs 6,000 crore that is even less than 1 per cent of their corpus (Rs 6.5 lakh crore).
SBI Mutual Funds has been roped in by the EPFO for assistance in investments in ETFs. EPFO has not invested in equity markets so far.
