EPF’s investment growth retards in prevailing market conditions

Sri Lanka’s largest social security scheme, the Employees Provident Fund‘s ( EPF) listed equity investments are not generating expected growth due to prevailing market conditions, financial analysts say.

Market values of investments made by the fund are not increasing proportionate to purchased cost of shares in listed equities and it will affect the rate of return of its member balances for the current fiscal year, they warned.

However the investment policy of the fund is focused on providing a long-term positive real rate of return to the members, a senior Central Bank official said.

Investments have been made ensuring the safety of the fund and availability of the adequate level of liquidity to meet refund payments and other expenses of the fund, he added.

The EPF has incurred a market loss of around Rs. 39.08 billion during the first quarter this year from their investments in 83 listed equities, Central Bank’s EPF department data showed.

The total investment in these equities was Rs.84.05 billion at the end of the first quarter this year and its market value has come down to Rs.44.97 billion during this period.

The fund has incurred a loss of Rs.39.08 billion by investing in the stock market, EPF department’s listed equity portfolio record revealed.

The highest sum of Rs.448.73 million has been invested in Access Engineering PLC and its market value has come down to Rs.270.31 million by 31 March 2020.

The investment made in ACL Cables PLC was Rs. 155.51 million and the market value increased to Rs.183.72 million.

A sum of Rs.1.99 billion had been invested in Aitken Spence PLC and its market value declined to Rs.632.14 million by 31 March 2020.

Those were the three main investments among 83 listed equities selected to make EPF investments in the stock market.

The total investment portfolio (book value) of the Fund grew by 10.9 per cent to Rs. 2,548.7 billion as at the end of 2019 from Rs. 2,298.8 billion at the end of 2018.

Accordingly, at the end of 2019, the investment portfolio consisted of 93.8 per cent in government securities, 3.0 per cent in equity, 1.7 per cent in corporate debentures and trust certificates, 0.9 per cent in fixed deposits and the remaining 0.6 per cent in Reverse Repurchase agreement.

The total investment income of the Fund was Rs. 259 billion in 2019, recording an increase of 16.5 per cent compared to the previous year.