According to a report by Business Standard, the Employees’ Provident Fund Organisation (EPFO) is contemplating reinvesting 50% of its proceeds from the redemption of exchange-traded funds (ETFs) back into equity. This move aims to increase its exposure to equities and generate higher returns for its vast subscriber base of nearly 65 million individuals.

 

Sources familiar with the matter revealed that the proposal was discussed during an investment committee (IC) meeting held in October last year. The recommendation stemming from this discussion has been forwarded to the Central Board of Trustees (CBT), the EPFO's apex decision-making body, for further deliberation. The CBT is scheduled to convene for its next meeting on Saturday.

 

During the period of April to October in the fiscal year 2024, the EPFO invested approximately Rs27,105 crore in ETFs, pushing the total investments in ETFs over the past seven years to exceed Rs2.5 trillion.

 

Another proposal on the table for consideration by the CBT is to extend the redemption period for equity investments from the current four years to seven years over the next six years. This extension aims to optimize yields on equity investments.

 

Presently, the EPFO periodically redeems ETF units over a four-year period, with the realized capital gains treated as income and subsequently distributed to EPF subscribers as income.

 

Furthermore, the committee has recommended the formulation of guidelines for investing in units of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) sponsored by public sector undertakings (PSUs). The recommendation suggests allowing investment in such REITs and InvITs, lifting restrictions previously imposed and constituting up to 3% of EPFO’s total portfolio.

 

Sources stated, “The committee discussed and recommended to the CBT that it amend the investment management manual by removing REITs and InvITs from the restricted category and allow investment in such REITs and InvITs which would be sponsored by the units of public sector undertaking (PSU)."