Rise is ETF investments likely next week by EPFO


As per a senior official of EPFO, a proposal to increase the amount of investments in exchange traded funds (ETFs) is likely to be brought on at the next CBT (Central Board of Trustees) meeting of the Employees Provident Fund Organization (EPFO) which is scheduled to be held in 26th July.

The current scenario is such that EPFO is investing 5 percent of their investible deposits into ETFs despite receiving a strong opposition from the labour unions.

The officer further spoke on similar lines as the Labour Minster had stated previously wherein EPFO will enhance their proportion of investments into ETFs which will eventually turn out to be 12 percent of their investible deposits with every successive year. Such were the view previously stated by the Labour Minister Bandaru Dattatreya that also echoed in the statement of this official who would rather stay anonymous in his announcements.

So, far EPFO has been investing in ETFS since the month of August last year while still receiving stiff opposition from the labour unions. The total amount invested into ETFs by the aforesaid provident fund organization is Rs 7,468 crore as depicted on June 30th, 2016 and the absolute ROI or return on investment of the above amount is pegged at 7.45 percent.

Furthermore, to organize the mode of investments the Labour Ministry had also notified a pattern for investing on April 23rd, 2015 that allows room for investments in equities and shares and other relevant investment avenues ranging from 5 to 15 percent. But despite this investment pattern the CBT has decided to only spend 5 percent in ETFs to begin with since the last year.

The views of Mr. Dattatreya have been received to be as follows, he said that there will be a CBT meeting in the upcoming week and they may take a decision on the quantum of investments that will be made into the ETFs. He further added that they are still in discussion over the matter with BSE and the National Stock Exchange as well and have confirmed that the percentage of investments will definitely increase than the pre-existing amount from the last year.

He also added by saying that the Finance Ministry have awarded them with complete clearance on investing as much as 5 to 15 percent in ETFs and the fact that this is a long term investment, the market conditions are expected to settle down in the long term. He also believes that the present market situation needs money.

The previous week had the minister announcing that as of on June 30th, 2016 the Employees Provident Fund Organization has invested a total of INR 7,468 crore in two index-associated funds of ETF (Exchange Traded Funds). One of them being associated with BSE’s Sensex and the other is linked to NSE’s Nifty.

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