EPFO likely to raise equity investment to 10%

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NEW DELHI: Retirement fund body EPFO may double the proportion of its investment in exchange traded funds (ETFs) this fiscal to 10%, potentially escalating friction with trade unions.

A panel set up by the Employee Provident Fund Organisation’s (EPFO’s) finance audit and investment committee (FAIC) has suggested doubling the proportion of its investment in ETFs to make it a meaningful contribution to the overall portfolio return of the EPFO.

An official reportedly said a decision to this effect could be taken at the EPFO’s central board of trustees (CBT) meeting on Tuesday.

The EPFO had so far invested 5% of investible deposits in ETFs despite opposition from labour unions. The amount invested by the EPFO in ETFs was Rs 7,468 crore as on June 30. The absolute return on the investment so far is 7.45%.

“As per the agenda, the labour ministry will update us on the EPFO’s investment in equity as well as place before us the report of the expert group.

However, unions will continue to oppose any such investment,” said DL Sachdev, who is also member of CBT, of All India Trade Union Congress (AITUC).

The expert panel has pointed out that at present the Employee Provident Fund Organisation’s equity investment constitute less than 1% of the total corpus compared with the global average of about 30%. Earlier, labour minister Bandaru Dattatreya had indicated that the proportion of EPFO’s equity investment would be increased.

Besides the enhanced limit of investment in equity, CBT may also discuss the relative powers of the central government and board of trustees of the EPFO as mentioned in the EPF&MP Act and the EPF Scheme framed there under.

All members of the CBT have called for a discussion on the issue of powers of the CBT and its members as it has a bearing on matters placed for before it for consideration. They were of the view that the Board is competent to take decisions within its statutory powers and only such decisions require a reference to the government, which the Act and Schemes so specify.