Govt supports investing higher EPF sum in ETF

Decision to be taken in next meeting this month; unions to oppose

The government is in favour of increasing the proportion of investment from provident fund corpus in equity markets via the exchange-traded fund (ETF) route, but faces stiff resistance from trade unions. 
 

The decision was conveyed by the labour ministry at a meeting of the Employees' Provident Fund Organisation's (EPFO) Central Board of Trustees (CBT) here on Friday. 
 

The report, submitted to the Finance Investment and Audit Committee, found that it has given a ‘healthy’ return of 7.45 per cent on its Rs 7,000-crore investment till date. CBT is the highest decision-making body in the EPFO. 
 

“This is as good as return from government securities; fluctuations keep happening, but such investments are made keeping long-term interests in mind,” Labour Secretary Shankar Agarwal said after the meeting. 
 

At present, EPFO invests five per cent of its incremental deposit in equity markets through ETFs. 
 

“I have told representatives of employees, employers and state governments and apprised them of the global trend, which has shown that investment in equity markets is beneficial in the long run,” said Labour Minister Bandaru Dattatreya. 
 

However, trade unions opposed the idea of increasing the proportion of money into equity markets. 
 

“Investment in equity is speculative and has the potential of destroying a worker's lifetime saving,” said D L Sachdeva, national secretary, All India Trade Union Congress. 
 

The proposal will now have to be passed by CBT at its next meeting later this month where it is likely to face stiff resistance from the trade unions. 
 

Dattatreya assured that any change in decision regarding investment in equity markets will be taken after gaining support from all CBT members. “Some members have expressed their concerns and we are taking the opinion of all into consideration,” said the minister. 
 

In 2015-16, EPFO entered the stock market for the first time following a suggestion by the finance ministry. So far, the body has invested Rs 7,000 crore in two ETFs. 
 

The retirement fund body, according to its earlier analysis, had suffered losses of 9.54 per cent on its Rs 5,920 crore investment in ETFs since August last year, prompting labour unions to demand a rollback of the decision to park funds in stock markets. On what prompted this change in return, Agarwal said that it has happened due to significant gains in capital market. 
 

Earlier, in an interview to Business Standard, Dattatreya had hinted that the government might invest a higher proportion of EPF money in ETF. “Naturally, it will go higher. We have called portfolio managers and stock analysts and seen their presentations,” he had said.