EPFO likely to invest part of its corpus in InvITs

Retirement fund manager Employees Provident Fund Organisation (EPFO) may start investing a portion of its annual deposits in infrastructure investment trusts (InvITs).

The move could not only help India boost investments in infrastructure but also expand the scope of EPFO’s investment basket beyond bonds, government securities, and exchange-traded funds (ETFs), three government officials, said, requesting anonymity.

An InvIT is an alternative investment fund (AIF) that works like mutual funds and is overseen by market regulator Securities and Exchange Board of India (Sebi).

“Among AIFs, InvITs are a good option. There is a demand for long-term funds in the larger infrastructure sector. It also offers a diverse mix to EPFO to look beyond its traditional investment vehicles,” said one of the officials cited above.

The union budget signalled the government’s intent to pump in more money from institutions into infrastructure. There is an understanding that through InvITs, infrastructure projects can raise long-term funds from pension funds, said an official.

Infrastructure funds, SME funds and social venture funds are some of the options in the category one segment of the AIF and are governed by Sebi regulations. This has also “been allowed by the Union government to be an investment option for EPFO,” according to the second official and documents reviewed by Mint.

“But if you look at the feasibility of these options, then infra funds (InvITs) are emerging faster,” the second official added.

“The alternative investment fund gives us a wider option to park our deposits. But we are allowed to invest in category one and category two AIFs. Here InvITs are possible opportunities. Though InvITs are available in private and public sector unit (PSU) space, EPFO can weigh the options and may look at PSU InvIT if our central board decides to look at only the government sector,” the second official said.

“The government has allowed us to invest a portion of our deposits in alternative funds. But what instruments we will invest afresh will be decided by our central board,” said Sunil Barthwal, central PF commissioner, without giving details.