InvestorQ : Why is the EPFO planning to sell its ETFs in a big way?
sarah Leo made post

Why is the EPFO planning to sell its ETFs in a big way?

Rashi Mehra answered.
2 years ago

The Employee Provident Fund Organisation or the EPFO will be compelled to sell its investments worth nearly Rs.9000 crore in ETFs to cover the shortfall this year. It has committed to pay 8.5% of which there is a shortfall to be covered.

In total, the EPFO will sell Rs.9017 crore worth of ETF investments that it had made in 2016 in predominantly in PSU stocks which were made over time in a number of spread out tranches. These units will be sold on a FIFO basis.

Since its cost is quite low in most of these PSU stocks, the EPFO hopes to make profits of Rs.2850 crore from the sale of these ETFs. That should be sufficient for the EPFO to fill up. These units are largely spread between SBI MF and UTI Mutual Fund.

Currently, the EPFO invests 85% in fixed income instruments and the balance 15% in equity through the ETF route. This is the right practice as it helps long term PF funds to participate in the positive risk-reward of equities over the long term.