Fund houses are rushing to file offer documents with SEBI to launch ETFs to get a slice of the EPFO pie.
Recently, UTI Mutual Fund has launched two ETFs - UTI Nifty ETF and UTI Sensex ETF targeting EPFO money. Similarly, LIC Nomura has filed offer documents to launch five ETFs. “We are planning to approach EPFO. We are hopeful of receiving the mandate,” said a senior official from LIC Nomura Mutual Fund.
Another public sector AMC IDBI is also planning to launch IDBI Nifty ETF. India’s largest fund house by assets, HDFC MF has also filed offer documents to launch three ETFs.
In order to win the EFPO mandate, fund houses are planning to keep the expense ratio as low as possible. SBI MF is charging a TER of seven basis points in SBI Nifty ETF and SBI Sensex ETF. Other fund houses are expected to seek EPFO mandate at the same or less TER as charged by SBI MF.
The Labour Ministry has started investing 5% of incremental corpus of EPFO in equity markets through SBI MF ETFs. These ETFs track the broad equity indices like S&P Sensex and Nifty 50.
The government has expanded the list of eligible securities in which pension funds and provident funds can invest to include exchange traded funds, debt mutual funds and real estate investment trusts. Such entities can investment up to 15% in equity (with minimum 5% in ETFs).
Last year, the finance ministry had given a mandate to Goldman Sachs AMC to launch and manage the central public sector enterprise (CPSE) ETF through which it had divested its stake in 10 PSUs. Currently, EPFO manages a corpus of Rs.8.50 lakh crore.
