EPFO will invest 5% of annual deposits in alternative funds, InvITs

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New Delhi: The Employees’ Provident Fund Organisation’s (EPFO) central board approved investing up to 5% of yearly deposits in alternative assets, such as infrastructure investment trusts, on November 20. (InvITs).

This will provide diversification to the EPFO’s investment portfolio, but analysts feel it will also come with some risks.

“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.

The Union government enabled investors to invest in Alternative Investment Funds (AIFs) earlier this year, although the announcement came after the EPFO board’s March meeting.

The EPFO’s fund is increasing, and it’s time to diversify its investments. In the bigger infrastructure space, there is also a demand for long-term finance.

InvIT is an AIF that works like a mutual fund and is regulated by the Securities and Exchange Board of India (SEBI). By aggregating various assets under a single organisation, invITs allow infrastructure asset developers to monetize their assets.

Besides InvITs, SME funds and social venture funds are examples of AIFs in the category one segment, which are regulated by SEBI. Authorities anticipate that the Central Board of Trustees will only be able to consider public sector InvITs at first.

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