The Employees’ Provident Fund Organization’s central board of trustees approved hiking the investment limits in exchange traded fund to 15% from the current 10%, despite opposition from few of its members. Representatives from the Centre of Indian Trade Unions and All India Trade Union Congress opined that employee retirement funds must not be toyed with in market instruments as the returns are uncertain. However, a need was felt to diversify the sources of investment for subscribers to earn better returns in the long run.
ETF trades in stock exchanges and tracks a particular sector like an index or a commodity . The EPFO invested 10% of the fresh corpus in ETFs in FY 2016 and 5% in FY 2015.
Earlier the EPFO had received an Indian Institute of Management, Bangalore report on ways to share returns from investments in ETFs with its over 4.2 crore subscribers. The investments in ETF’s in the last two years amounting to Rs.22,858.69 crore have earned an annualised return of 13.72%, but there has been no mechanism to pass on the benefits to the subscriber.
The board invests money in ETFs of sensex, Nifty and central public sector undertakings.
Members were informed that according to the report, returns can be distributed to subscribers based on NAV prevailing on the date of the member’s exit from the fund or on maturity .
However, employee unions sought a more clear roadmap before this is formalised. Therefore, it was agreed that this will be taken up in the subsequent board meeting within two months.