The retirement savings managed and overseen by the Employees’ Provident Fund Organisation (EPFO) are set to cross the Rs.10 lakh- crore mark this month, making it the eleventh largest pension fund in the world.
With savings of over 8.5 crore employees in the formal sector from 6.32 lakh establishments, the EPFO is already India’s second largest non-banking financial institution with only Life Insurance Corporation of India having a bigger kitty.
“By December-end, the assets under EPFO’s regulation would cross Rs.10 lakh crore,” Central PF Commissioner K.K. Jalan told The Hindu. “This include Rs. 7 lakh crore remitted to the PF department and managed by our fund managers and Rs. 3 lakh crore managed by the company-run self-managed PF trusts that we regulate.”
Globally, pension funds are one of the largest pools of capital with a long-term horizon for investments. The 300 largest pension funds in the world together had over 15 trillion dollars under management in 2014, rising by 3 per cent from a year ago, according to a recent report by Towers Watson, a consulting firm.
Overall, pension funds had nearly 35 trillion dollars of savings in 2014.
The higher growth rate of the EPF corpus, compared with its peers in the developed world that is going through a prolonged economic slow-down, is likely to push it into the top 10 pension funds of the world in the coming years.
During 2015-16, the EPF coffers are expected to receive Rs.1,15,000 crore of fresh accruals from employee contributions, 15 per cent higher than it had originally estimated. The pace of inflows is expected to rise further if the economic recovery gathers pace, another official said. The EPFO would need to start looking at new investment avenues to deploy these funds, he said.
After years of resistance, EPFO started investing in equities this year. It has already invested over Rs. 3,200 crore in the stock market.
While the Union Finance Ministry has allowed non-government provident funds to invest up to 15 per cent of their fresh accretions into equities, the EPFO has decided to make a cautious start, allocating 5 per cent of its net inflows into stocks.
Mr. Jalan said the pension fund was open to investing in the infrastructure sector, but was yet to find a suitable instrument to cover the risks infrastructure projects entailed.
Last month, the EPFO altered the norms that prevented it from investing in debt rated lower than AAA, and it can now invest in the private sector debt rated AA+ by at least two credit rating agencies.
However, infrastructure investments rarely secure such ratings.
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