EPFO advisory body to vet stock exposure hike proposal

Retirement fund manager EPFO's advisory body Finance, Investment and Audit Committee (FAIC) will examine the proposal to increase investments in exchange traded funds (ETFs) to 15 per cent from 10 per cent on May 25. The Employees' Provident Fund Organisation's (EPFO) apex decision-making body Central Board of Trustees will take a final decision on raising investment in ETFs for the current fiscal on the basis of the FAIC recommendations on May 26.

After the CBT approval, the EPFO will be able to park over Rs 15,000 crore in the ETFs in 2017-18 as its investible deposits are around Rs 1 lakh crore every year.

According to a source, the FAIC is scheduled to meet on May 25 where a status report on the EPFO's investment in the ETFs will be presented and views of the members will be sought on raising the same.

As per the status report, the EPFO has invested Rs 21,050 crore in the ETFs till April 2017. Of this, Rs 18,182 crore have been invested through SBI Mutual Fund and Rs 2,868 crore via UTI Mutual Fund.

SBI MF has given an overall return of 110.03 per cent while the UTI MF has earned 7.39 per cent.

The EPFO had invested Rs 15,376.12 crore till March 22, 2017, for which it received a dividend of Rs 234.86 crore.

This apart, the FAIC will deliberate on the proposal of giving one-year extension to SBI MF and UTI MF for the ETF investments for one year beyond June 30, 2017.

The proposal to raise investments in the ETFs was deferred at the CBT meeting on April 12, 2017. Some trustees led by Bharatiya Mazdoor Sangh member P J Banasure demanded an exit policy for liquidating various investments in securities, state loans and ETFs. Banasure had said there should be an exit policy for maximising returns on investments made by the EPFO.

In 2015, the finance ministry had allowed private provident funds to invest 5-15 per cent 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 per cent of its over Rs 1 lakh crore investible amount in ETFs.