The Central Board of Trustees (CBT), the tripartite apex decision-making physique of the Employees’ Provident Fund Organisation (EPFO), is scheduled to satisfy on June 25-26 in Bangalore to deliberate on elevating the orgnaisation’s publicity in equities to 25% of the contemporary annual accretions in phases from the current cap of 15%.
EPFO manages a Rs 17 trillion corpus and maintains over 240 million accounts pertaining to its members. It will get about Rs 2.3 trillion from round 6.5 million energetic subscribers yearly.
In view of the falling earnings from its funding which compelled EPFO to declare an over-four-decade low of 8.1% curiosity on provident fund deposits for 2021-22, the Finance Investment and Audit Committee (FIAC), a sub-committee of the CBT, at its assembly final month mentioned elevating the funding ceiling in equities in two equal phases of 5% every to make sure greater returns for EPF members.
“Various opportunities and options including the possibility of increasing the threshold of investment in equities were discussed in the last FIAC meeting. Bettering return on investment of the members is our sole intention. At the same time, we also look at risk mitigation in the current backdrop of volatile market conditions across the globe. We have listened to various presentations from the external experts and internal group of investment monitoring cell (IMC) of the EPFO on the pros and cons of the options and also discussed the need for the change in policy guidance” stated Okay E Raghunathan, a member of each FIAC and CBT, stated.
FIAC’s suggestions are vetted by the CBT which then sends these to the finance ministry for its approval. As per the present funding sample, EPFO invests between 45-65% in authorities securities, between 20-45% in debt devices, as much as 5% in short-term debt devices, as much as 15% in equities, as much as 5% in asset backed, belief structured and miscellaneous investments.
EPFO invests equities within the type of alternate traded funds (ETFS) each Nifty and Sensex. It began investing in ETFs with impact from August 5, 2015, initially with 5% of the annual investments. At its September, 2016 assembly, the CBT enhanced the allocation to 10% and in 2017, the brink was additional raised to fifteen%.
In 2020-21, EPFO made Rs 32,071 crore funding in ETFs. Cumulatively, it made a complete of Rs 1.38 trillion funding. However, it redeemed some funding at numerous factors and as on March 2021, EPFO’s present funding was Rs 1.23 trillion and the notional worth of funding was Rs 1.6 trillion, indicating 14.67% return.
Source: www.financialexpress.com”