Provident funds now turn to equities

Provident Fund
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.

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