EPFO had in January 2017 decided to invest in select exchange traded funds (ETFs) to help the government achieve its disinvestment target
Just two days to go before it announces its annual EPF interest rate, the Employees’ Provident Fund Organisation (EPFO) is staring at subpar yields on its equity investments in CPSE ETFs and Bharat 22 ETF, the Mint reported.
As of December 31, its investments in CPSE ETFs and Bharat 22 ETF have yielded just 1.89 percent and 0.48 percent, respectively. This spells bad news for its over six crore subscribers.
EPFO had in January 2017 decided to invest in select exchange traded funds (ETFs) to help the government achieve its disinvestment target.
In August 2015, it began with a mandate of investing 5 percent of its investible deposits in the equity linked scheme. The proportion was increased to 10 per cent in 2016-17 and 15 percent subsequently in 2017-18.
This compares unfavourably with the yields on those run by SBI Asset Management Co. and UTI Asset Management Co. As of December-end, the ETFs by SBI and UTI have returned an average 12 percent and 10.31 percent, the report said.
At present, the retirement fund body has invested Rs 5,507 crore in CPSE ETFs in three tranches beginning January 2017 and in Bharat 22 ETF in two tranches beginning November 2017.
According to the newspaper report, this issue is likely to be discussed at its central board meeting on February 21 and is also likely to consider further ETF investments.
Bharat 22 ETF
The second follow-on offer of Bharat 22 ETF (B22ETF) had opened for subscription on February 14. Since its launch in November 2017, the government has raised Rs 22,900 crore so far through B22ETF through two tranches.
An investment in this fund since its launch has posted a loss of 8.7 percent. Over the past one year period, it has grossly under performed Nifty, down 9.66 percent versus a gain of 2.55 percent for the index.
On February 14, Moneycontrol had reported that it is not an investment option for beginners. “The investors looking for actively managed investment solutions must steer clear of this scheme. This cannot be a core portfolio holding either. If you are looking to invest in largecap stocks, an ETF (or exchange-traded fund) tracking Nifty can be a better investment option. You may also want to explore actively managed multi-cap schemes with a long-term view, which will own some of the stocks that are constituents of this index on the merits of individual stocks from time to time,” the article stated.
The performance Central Public Sector Enterprises ETP too has been disappointing since its inception in April 2014. Over the last one-year, the instrument is down 22.82 percent. Then in January 2017 and March 2017 further fund offer (FFO) and FFO 2 were launched, respectively.In November 2018, the third FFO helped the government garner more than Rs 17,000 crore.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.