EPFO’S ₹1 lakh crore ETF return in negative zone
NEW DELHI: Belying promises, five years of investments via exchange-traded funds (ETFS) have yielded the Employees’ Provident Fund Organisation (EPFO) negative returns, with implications for subscriber payout.
While the overall cumulative return is almost -8.3% as of March 31 for its ₹1.03 lakh crore equity investments, its return on investments in governmentbacked Central Public Sector Enterprises (CPSE) ETF has given it a -24.36% return.
Similarly, in the governmentbacked Bharat 22 ETF, EPFO’S return on investments is -19.73%. The other two ETFS run by SBI Asset Management Co. and UTI Asset Management Co. have yielded -6.19% and -10.06% for the retirement fund manager, according to official documents reviewed by Mint.
The issue is likely to be discussed in the central board meeting of the EPFO later this week. EPFO invests 85% of its annual deposits in debt instruments and the remaining 15% in equity invested via ETFS.
Though equity investments have inherent risks, in 2020-21 when debt investments are expected to earn less, its equity returns may not offer a cushion to EPFO, potentially impacting the rate of interest for millions of its subscribers.
The problem also highlights its choice of some ETFS that are yielding very low returns—a potential ethical concern for a pension fund that manages statutory retirement savings for millions of low-wage workers.
A board member of EPFO who declined to be named said, “Investments to achieve goals of government have their shortcomings. The retirement fund body needs to realise there is a difference between educated investors investing by choice, and uninformed workers’ money getting invested by default through avoidable ETFS.”