Private PF trusts can invest 5-15% in equity markets

EPFO to start equity investments in July

The Union labour ministry has notified the investment pattern for company-run Provident Fund (PF) trusts, allowing them to invest 5-15 per cent of the incremental corpus in equity markets.

This is in line with the investment pattern recommended by the finance ministry and earlier notified by the  labour ministry for firms covered under the Employees’ Provident Fund Organisation (EPFO).

 

The central government has said EPFO will initially invest no more than five per cent of its corpus in exchange-traded funds (investment funds traded on stock exchanges). In an interview to news agency Reuters, Union labour minister Bandaru Dattatreya said the retirement body will start investing in stock markets from next month.

EPFO’s overall corpus is about Rs 6 lakh crore and its incremental corpus for 2015-16 is expected to be Rs 1 lakh crore, an official said. This means around Rs 5,000 crore may find its way into the stock markets this financial year.

The new pattern will allow EPFO to park 45-50 per cent of its funds in government securities, 35-45 per cent in debt securities and term deposits of banks, up to five per cent in money market instruments, 5-15 per cent in equity and related instruments and five per cent in asset-backed securities and units of infrastructure investment trusts.

The decision to invest in equity markets was approved by the central board of trustees of EPFO, chaired by Dattatreya, a few months earlier. The labour ministry notifies its investment pattern after considering the CBT recommendations.