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Retirement Fund Body Investment: Employees’ Provident Fund Organization (EPFO) is looking to increase its equity exposure and reinvest the redemption proceeds from its investments in exchange-traded funds (ETFs) back into equity or related instruments. The ET report states that the retirement fund body may soon approach the finance ministry.
EPFO is considering increasing investment in ETFs to maximize returns. According to ET, the proposal was approved by the EPFO’s Central Board of Trustees in the last week of March. Under this proposal, the proceeds of ETF investment can be reinvested in equity and related instruments, due to which equity investment in EPFO will increase.
How much investment is allowed from ETF
Under the notification issued by the Ministry of Finance, EPFO invests funds in equity. Under the recently released guidelines, EPFO can invest between 5 and 15 per cent annually in equity through ETFs. While invests the remaining amount in debt securities.
When and how much the investment limit increased
According to the retirement fund body, till January 2023, share equity investment was only 10 per cent of the total employee provident fund corpus, while the limit was up to 15 per cent. In the year 2015-16, EPFO started investing in ETFs with 5 per cent. The equity limit was increased to 10 per cent by the year 2016-17 and further increased to 15 per cent in 2017-18. Till March 31, 2022, Rs 1,01,712.44 crore i.e. 9.24 per cent of the total investment of Rs 11,00,953.66 was invested in ETFs.
Significantly, the Employees’ Provident Fund Organization earns profits by investing in ETFs from time to time. Although the total investment allowed in ETFs is 15 percent and the rest is invested in others. In the financial year 2022-23, EPFO had availed the ETF units purchased during the calendar year 2018 for Rs 15,692.43 crore.
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