To get EPFO funds, listed companies would need to have a minimum market capitalisation of Rs 5,000 crore, even as the retirement fund body will invest only the exchange traded funds (ETF) in the current financial year.
The new investment pattern notified on April 23 by the Labour Ministry states that EPFO will invest a minimum of 5 per cent and up to 15 per cent of incremental deposits in equity or equity-related schemes. EPFO will invest in shares of those body corporates which have derivatives with underlying, trade in either of the two stock exchanges BSE or National Stock Exchange. The retirement fund body can also invest in units of mutual funds regulated by the Securities Exchange Board of India and which have minimum 65 per cent of their investment in shares of body corporates listed on BSE or NSE.
The guidelines also state that the aggregate investment in units of mutual funds shall not be in excess to 5 per cent of total portfolio of fund at a time and fresh investment in such mutual funds shall not be more than 5 per cent of the fresh accretions invested in the year. According to new norms, EPFO can invest in ETFs or index funds regulated by the Sebi that replicate the portfolio of either BSE Sensex or NSE 50.
Investment is also permitted in in ETFs issued by Sebi regulated by mutual funds constructed specifically for disinvestment of shareholding of Government of India in body corporates. The norms also provide for investing EPFO funds in the exchange traded derivatives regulated by Sebi having sole purpose of hedging.
The investment pattern will be achieved separately for each successive financial year through timely and appropriate planning, the notification said. As per the new norms, the EPFO will invest 45-50 per cent its incremental deposits in government securities and related investment. EPFO shall invest 35-45 per cent of its incremental deposits in debt instruments including those issued by banks, body corporates and public financial institutions.
It will continue to invest up to 5 per cent of its deposits into money market instruments.