The Employees’ Provident Fund Organisation (EPFO) may soon start investing in the Alternate Investment Funds (AIFs) as a means to diversify the avenues to keep the subscribers’ retirement savings.
As per a report by the Times of India, EPFO would start investments in asset classes which would include startups, five years after the government gave it permission to invest in AIFs. The retirement savings body would put the proposal to diversify its portfolio before the Central Board of Trustees (CBT). The discussions would be led by Union Minister of Labour and Employment Mansukh Mandaviya.
The proposal, as per the report, would allow EPFO to allocate a maximum of 3 percent of its new annual accretions to Categories I and II Alternative Investment Funds (AIFs). The proposal was considered by the investment committee on October 22.
The decision is being made because of a letter sent by the Department for Promotion of Industry and Internal Trade (DPIIT) to EPFO in September, asking for their participation in the recently started Startup India Fund of Funds 2.0.
Initially EPFO is thinking about sending its money to places like the National Investment and Infrastructure Fund (NIIF) and the Small Industries Development Bank of India (SIDBI). SIDBI runs the Startup India Fund of Funds 2.0.
The plan will be shown to the Central Board of Trustees in November. The board, led by Mandaviya will look at the proposed investment rules prior to any allocation.
The Finance Ministry says EPFO can put up to five percent of money each year into asset‑backed and trust‑structured deals. The retirement savings body has not yet put money into AIFs that are overseen by the Securities and Exchange Board of India (SEBI) in Category I and Category II.
Category I AIFs go into things like startups, small and medium businesses, infrastructure, social projects and venture capital. Category II AIFs are equity funds, real‑estate funds and private debt funds that do not belong to Category I or Category III and do not borrow or use leverage.
The new investment rules are expected to have safety nets to keep retirement savings safe. They might set a minimum amount of Rs 100 crore for AIFs that are allowed cap how much EPFO can put into each fund and stop EPFO from putting money into companies that are set up abroad.
The rules are also expected to make sure that fund managers stay independent from the people who started the fund according to the report.
EPFO holds about Rs 30 lakh crore in retirement savings for almost 30 crore members. The new money plan will let EPFO spread its investments beyond debt and try new chances in fast‑growing sectors.
The plan is still being looked at and needs a green light, from the Central Board of Trustees. The final rules will decide how the money goes out and which AIFs can get it.
