EPFO invests Rs 9,723-crore in ETFs, earns 9.17% absolute return
Retirement fund body EPFO has invested Rs 9,723 crore in exchange traded funds (ETFs) till October this year while absolute return on these investments was 9.17%, Parliament was informed on Monday.
"The total corpus of Employees Provident Fund Organisation (EPFO) was Rs 7.49 Lakh crore as on March 31, 2016. The total amount invested by EPFO in ETFs is Rs 9,723 crore as on October 31, 2016 and the absolute return was 9.17% as on October 31, 2016," Labour Minister Bandaru Dattatreya said in a written reply to Lok Sabha on Monday.
The Minister told the House that as a precautionary measure in volatile stock markets, EPFO is investing only in Nifty and Sensex ETFs.
The Minister also informed the House that investment in ETFs by EPFO will double from the existing level of 5% to 10% within the scope of investment pattern notified by Finance Ministry.
He further said that the employees representatives of the Central Board of Trustees (CBT) had opposed the move to invest in capital market.
He explained that returns from investment made in ETFs are generally higher than returns from other investments which eventually benefits the subscribers.
Asked about crediting benefits accrued from ETF investments, the Minister said that the dividend yield becomes part of the net asset value of the ETF and will, therefore, be added to the account of Employees Provident Fund (EPF) of the employees wherever applicable.
EPFO had started investing in stock markets in August last year. It had decided to invest 5% of its investible deposits into ETFs during 2015-16. It has a subscriber base of over four crore with annual incremental deposits of over Rs 1.2 lakh crore.