The move will offer diversification to the EPFO’s investment basket but experts believe it comes with a fair amount of risks too.
The central board of the Employees’ Provident Fund Organisation (EPFO) on November 20 approved investing up to 5 percent of the annual deposits in alternative investments including infrastructure investment trusts (InvITs).
“The board has given its go-ahead. We shall only focus on government-backed alternatives which are category one funds like public sector InvITs,” said Sunil Barthwal, secretary, labour and employment.
This will offer diversification to the EPFO’s investment basket but experts believe it comes with a fair amount of risks too.
The Union government allowed investing in Alternative Investment Funds (AIFs) earlier this year but the notification came after the last EPFO board meeting in March.
EPFO’s corpus is growing and there is need to diversify investments. And, there is also a demand for long-term funds in the larger infrastructure space.
Regulated by the Securities and Exchange Board of India (SEBI), InvIT is an AIF that functions like a mutual fund. InvITs enable developers of infrastructure assets to monetise their assets by pooling multiple assets under a single entity.
Among AIFs, other than InvITs, SME funds and social venture funds are some of the options in the category one segment of the AIF and are regulated by SEBI. Authorities believe that to begin with, the Central Board of Trustees may only discuss public sector InvITs.