₹1.23 Lakh Crore Equity Investment from EPFO Returns 14.6% Interest

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The Employees’ Provident Fund Organization (EPFO) benefitted from a stock market surge to obtain an annualized 14.6% return on equity investments of ₹1.23 lakh crores (₹1.23 trillion). Meanwhile, Bharat 22 ETFs (Exchange Traded Fund) returned only about 2% for EPFO and EPFO’s investment in CPSE ETF returned negative results.

Over 6 crore earning individuals who are members of the EPFO and contribute to the government’s retirement funds management system      will be pleased with the high annualized return generated by the EPFO’s cumulative investments even if it was let-down by its investments in Bharat 22 and Central Public Sector Enterprise (CPSE) ETFs. The Bharat 22 ETF was launched to meet the govt.’s aim of divestment from public sector companies, while the CPSE ETF reflects the performance of few chosen CPSEs.

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The EPFO makes investments in the stock market solely through ETFs and EPF investments in SBI & UTI Mutual Funds have provided higher returns compared to Bharat 22 & CPSE ETFs. CPSE ETF returned a negative interest of -1.7% for the financial year 2021. The general notion from experts in the investment field suggests that better equity yield will benefit the EPFO’s interest paying capacity but that could be negated by the exposure to some ETFs which needs to be addressed as it creates losses on savings of crores of employees.

At the end of the financial year on 31st March 2021, the SBI Mutual Fund invested EPFO corpus has afforded a return of 15.76%. and the corpus managed by UTI Mutual Funds returned an even better 16.37% interest according to the EPFO. While the Bharat 22 & CPSE ETFs were designed to meet the government’s goals of divestment, they have proved to be bad investments for the EPFO. By the end of the financial year 2021, EPFO had net investments of ₹1,22,986.4 crore (almost Rs 1.23 lakh crore); the notional value of the investments was pegged at ₹1.6 lakh crores, effectively giving it a 14.67 percent annualised return. More details will be out in the public when presented to the EPFO Central Board during their next meeting on 20th November.

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Overall, to confirm the net positive returns of EPFO’s equity investments, the key indicator is the rise of the stock market since the beginning of the financial year. The S&P BSE Sensex has risen from 49,509.15 at the end of FY2021 to 60,322.37 at close on 16th November 2021.

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