Centre plotting to raise EPFO’s stocks investment despite negative returns

Unfazed by unions’ opposition and negative returns on stock market investments, Labour Minister Bandaru Dattatreya on Tuesday hinted at increasing EPFO’s investment in exchange traded funds for this fiscal from 5 per cent currently. However, he did not specify the quantum of increase in investments this year by the Employees’ Provident Fund Organisation (EPFO) from 5 per cent of its investible deposits parked last fiscal in exchange traded funds (EPFs).

“At present it is 5 per cent in Exchange Traded Funds (ETFs). In long terms it is profitable. In this context we want to see it. We will hold the CBT (central board of trustees) meeting (where this proposal will be discussed). But I am confident that it will go beyond five per cent,” he said at a press conference on initiatives taken by Labour Ministry in the last two years of NDA regime.

The CBT is the apex decision making body of the EPFO, which is headed by the Labour Minister. Trade unions have already lodged their protest against parking EPFO’s funds in stock market and submitted their dissent note on the issue in earlier meetings of the CBT. Asked about the unions’ opposition, the minister said, “We will listen to the CBT members. They will speak on it (whether to increase it or not). But the final decision will be of the Labour Ministry. I am the chairman of CBT. In capacity of Chairman I will take a decision.” 

The EPFO invested Rs 6,788 crore in ETFs so far since August last year and has got a return or yield of 1.68 per cent on these investment, Labour Secretary Shankar Aggarwal said. As per the earlier estimates of the EPFO, it earned a negative return of 9.54 per cent on its Rs 5,920 crore investment in ETFs from August 6, 2015 to February 29, 2016.

The market value of investments of Rs 5,920 crore in the ETFs in 2015-16 was Rs 5,355 crore as on February 29, 2016, as per an analysis of equity investment by the EPFO.