India’s biggest pension fund isn’t the only conservative manager of public money now investing in equities. Standalone provident funds, which together manage about $16 billion in savings for their staff, have started buying exchange-traded or mutual funds as stocks continue to outpace all other classes of an asset in yielding high returns.
Standalone retirement funds now invest 5-10% of their corpus in equities, a move that should help money managers offset the impact of falling returns on bond investments that are losing sheen. Provident funds are allowed equity and equity-linked exposure of up to 15% of their corpus, and the rest goes to debt securities, including central and state bonds.
Trust Capital advises about 800-900 such entities, known as exempted provident funds in market parlance.
India’s apex retirement fund manager, the Employees Provident Fund Organization (EPFO), has already booked a profit of more than Rs 1,000 crore by selling some of its equity investments. Speculation is rife that the minimum cap may be raised selectively.
