EPFO gets 3 new fund managers

The State Bank of India8217;s monopoly in managing the Rs 1,54,000 crore corpus of the Employees Provident Fund...

The State Bank of India8217;s monopoly in managing the Rs 1,54,000 crore corpus of the Employees Provident Fund, has finally ended. The Central Board of Trustees today allowed three private fund managers HSBC AMC, ICICI Prudential AMC and Reliance Capital AMC to invest the incremental annual accretion of Rs 30,000 crore to the EPFO corpus for two years, beginning this September.

While the move does take forward the reform process in the working of the country8217;s largest pension scheme, it still does not address the major concerns of providing more investment avenues to improve returns from the fund and improving the transparency in the accounting procedures.

The decision was cleared today at the meeting of EPFO8217;s Central Board of Trustees chaired by Labour and Employment Minister Oscar Fernandes. The Board comprising 42 members 8211; 10 each from employers8217; and employees8217; organisations and the Central government besides 12 state government representatives 8212; adopted the recommendation of the Finance and Investment Committee of the EPFO with a majority vote. Ten members from employees8217; organisation opposed the entry of private fund managers.

The quantum of funds to be managed by these four fund managers would be fixed at a certain proportion, to be decided on a later date. According to government officials, credit rating agency Crisil, appointed as consultant to the EPFO, had submitted a list of fund managers based on their financial and technical bids. While 17 companies were invited to submit the request for proposals, 10 were shortlisted in the technical bid stage. Two funds 8212; HDFC AMC and Birla Sun Life AMC 8212; quoted zero per cent and their bids were rejected.

Labour Secretary Sudha Pillai told The Indian Express with multiple fund managers on board, the EPFO should be able to meet the promised interest rate to subscribers. The EPFO hopes to save Rs 1.5 crore, paid as commission fee to the sole fund manager, SBI by having multiple fund managers now. Experts said, new fund managers can, at best, offer 10-20 basis points more returns since the investment guidelines 8212; which prohibit deploying money in stocks or mutual funds 8212; remain the same.

While the top three were HSBC AMC management fee 8212; 0.0063 per cent, ICICI Prudential 0.0075 and SBI 0.01, it was felt since the Anil Dhirubhai Ambani Group-promoted Reliance Capital AMC too quoted the same fee as SBI, it may also be roped in as the fourth fund manager.