EPFO names Mercer adviser

The Employees Provident Fund Organisation (EPFO) has appoint Mercer Consultants, an international investment advisory company to rejig the Fund's Rs 1,40,000 crore investment portfolio, including exploring the possibilities of investment abroad.

The EPFO is the largest pension fund in the country in the private sector. It has been grappling with the problem of finding high return investment avenues to ensure a 9.5 per cent annual return to its 2.3 crore depositors.

The Central Provident Fund Commissioner of EPFO, Ajay Singh said Mercer will advise the Fund on the best practices in investing its fund. The State Bank of India, which is the fund manager for EPFO has so far also doubled up as the investment adviser to it. Mercer is expected to provide an unbiased opinion on the investment profile of the Fund.

In February this year, SBI made a presentation to the Central Board of Trustees of the EPFO on the fresh avenues for investment by the fund. This had become necessary as the government has turned off the tap of Special Deposit Scheme (SDS).

Most Provident Funds, were parking nearly 80 per cent of their investments in SDS till 2003. SBI had suggested that EPFO should increase its exposure in private investment avenues like debt papers of private banks, mutual funds and in repo markets.

It has also said the Fund should get more flexibility in investing and exiting out of public sector papers. The Fund has often complained that because of stiff investment norms, it cannot lower its exposure in debt papers of PSU before these are downgraded by the rating agencies.

Mercer is expected to submit its report to EPFO by four months, from the date of its formal appointment. The USA based company has a large number of pension and social security companies as its clients.

The EPFO will be looking to the company for guidance to maximise the returns from its investment, yet maintaining the safety of the portfolio.

This can also include investment in listed equities abroad on the lines of those allowed for mutual funds and the proposed norms for the upcoming pension fund managers.

All employees of private sector companies in the country, employing more than 20 people, have to compulsorily deposit 12 per cent of their monthly basic pay with the Fund.

The problem of receipts and outflow position of EPFO has arisen because under political consideration, it has been offering a very high rate of interest to the contributors. But there are no investment avenues in the market which offer any comparable rate of return.