EPFO’s investments in exchange-traded funds cross Rs 2 lakh crore

The Employees’ Provident Fund Organisation (EPFO) has invested a little over Rs 2 lakh crore in exchange-traded funds since 2018-19, which accounts for its exposure in equity markets. Out of a total corpus of Rs 18.3 lakh crore, the EPFO has invested 8.7% in ETFs and 91.3% in debt instruments including those of Public Account of India.

The information was provided by Minister of State of Labour Rameswar Teli in the Rajya Sabha on Thursday in response to a question on investment of EPFO fund.

The retirement fund manager’s investments in ETFs have been on rising since 2018-19 when it invested Rs 27,974 crore. It increased to Rs 31,501 crore in 2019-20 and over the years rose to Rs 53,081 crore in 2022-23. In the current fiscal till July, the EPFO, which is the country’s second largest financial institution, had invested Rs 13,017 crore in ETFs. It has invested a total of Rs 2,01,212 crore in ETFs since 2018-19 till July 2023.

The EPFO had begun investing in equities through ETFs in 2015-16 with an initial exposure of 5% of incremental deposits. This was gradually increased to 10%. The EPFO’s Central Board of Trustees, which is the apex decision making body, chaired by labour minister Bhupender Yadav, in its last meeting in March this year also decided to increase the exposure to 15% in a bid to improve returns for depositors. 

“EPFO does not invest directly in individual stocks including stocks of any blue-chip company. EPFO invests in Equity markets through ETFs replicating BSE-Sensex and Nifty-50 indices,” Teli said. EPFO has also invested from time-to-time in ETFs constructed specifically for disinvestment of shareholding of the Government of India in body corporate, he further said.

The EPFO announced an interest rate of 8.15% for PF deposits for 2022-23, which was just marginally higher than the multi decade low rate of 8.1% for 2021-22. Depositors as well as members of the CBT have been pushing for a higher return on retirement savings. 

A proposal to further hike the exposure to 20%, which was recommended by the EPFO’s Financial Investment and Audit Committee way back in December 2021, remains under discussion.