The Government's decision to allow Employees' Provident Fund Organisation (EPFO) invest 5 per cent of its Rs1 trillion investible fund in exchange traded equity funds has made mutual fund houses bullish about launching retirement equity funds, industry officials said.
“News that the EPFO will invest in exchange traded equity funds will send out a strong message to our investors,” Reliance Capital Asset Management Company President and Chief Executive Sundeep Sikka told PTI on the sidelines of an event held by the Wealth Forum on Friday.
The second largest institutional investor EPFO managing around Rs6.4 trillion will begin investing in exchange traded equity funds from this month. At present, retirement fund assets under management are merely Rs1,000 crore in the country. However, mutual fund houses believe that this space has potential to touch Rs15 trillion due to low penetration, which is currently at around 10 per cent.
In fact, within three months of its launch, a retirement fund being run by Reliance Capital AMC has already got 50,000 investors and the company plans to take it to five lakh investors in three years, Sikka said.
SBI Mutual Fund Managing Director and Chief Executive Dinesh Khara also echoed similar views said, “The EPFO's plan to invest in exchange traded equity funds will help educate our investors to invest in retirement equity funds.”
Equity funds have been giving a 18 per cent return for the past 20 years and hence asset management companies are sure of giving high returns to investors of retirement equity funds, he said.
“Right now, the actual investment made in the Reliance Retirement Fund is around Rs230 crore, including Rs180 crore in equities and the rest Rs50 crore in debt.