As per the report of The Times of India, the Employees Provident Fund Organization (EPFO) will plan to invest at other investment avenues due to the declining rates for central government securities.
Declining rates for central government securities have enforced EPFO to find other investment opportunities to get better returns for its subscribers.
The Employees Provident Fund Organization is planning to invest more funds in state government securities and AA+ rated instruments. However, AA+ rated instruments typically have a slightly higher yield, when compared to risk-free central government securities.
The Employees Provident Fund Organization has an amount of about Rs 10 lakh crore. Thus, it invests in a mix of securities of equity (ETFs) to debt. Few examples of debts could be central and state government securities with varying maturies, NHAI bonds, state development loans and corporate bonds etc.
The Central Provident Fund Commissioner, VP Joy has declared that when interest rates usually fall then we also look for opportunities where we get higher returns. Originally, the provident fund body was allowed to invest only 5 percent of its corpus in equity. However, last year it was raised to 10 percent and now it is fixed at 15 percent subsequently.
In year 2017, the organization was supposed to invest Rs 22,500 crore in ETFs. The investment of retirement fund body in ETFs has netted the body an annualized yield of over 12 percent.