EPFO gets 7.45% returns by investing in market-linked ETF

EPFO gets 7.45% returns

New Delhi: Employees Provident Fund Organization (EPFO) had decided to invest in equity in a bid to increase the earnings on its funds and got the necessary approvals from the Central Government. It is learnt that EPFO has earned a return of 7.45% by investing in the Exchange Traded Funds (ETF) linked to the share market.

EPFO accepts contributions from employees all over the country and is charged with helping to secure their retirement funds. It currently holds deposits of Rs 7.5 lakh crores. Though the EPFO can invest up to 15 per cent of its investible deposits in equity or equity related scheme, the body had decided to park 5 per cent of its available funds in ETFs to start with. The Employees’ Provident Fund Organization (EPFO) started investing in exchange traded funds (ETFs) in August last year initially with Rs 6,000 crores, thereafter about Rs 1, 250 crore were further invested in ETFs till June 30, 2016. 

EPFO has done 75% of its ETF investments under National Stock Exchange and 25% under the Bombay Stock Exchange. In total the investments amount to Rs 7,438 crores. The market value of these investments stands at Rs. 8,024 crores, as on date. Based on these numbers, EPFO made a profit of 7.45%, the Labour Minister reported to the Rajya Sabha. 

“As Chairman of the (EPFO’s) Central Board of Trustees, my paramount duty is to safeguard the workers’ interests. We have taken a very cautious approach. With that cautious approach, we have started it (investment in equities). The indications are positive and we are moving in the right direction,” Labour Minister Bandaru Dattatreya stated in his response to a call attention motion in Rajya Sabha.

“There is no question of diverting funds. This government is pro-poor, pro-worker and pro-progressive… We have made investments in Exchange Traded Funds (ETFs) and not in share markets,” he said. World over, this pattern is giving positive returns. These funds are generally for 10 years or more periods, so that’s why this will give encouragement in a positive direction and in a profitable manner,” he said.

Earlier the investment was done through SBI. but currently, the investments will also be done through UTI, as informed by the Labour Minister. Deposits with EPFO can earn the provident fund members interest up to 9%. The decision to invest in the ETFs was taken to increase the possibility of giving higher rates of interest. EPFO has already earned a return of 7.45% on its investment amounting to Rs 556 crores.