EPF to expand investments in equity market

Channa Kasturisinghe

INVESTMENT: In pursuit of higher returns the Government is planning to expand the listed equity portfolio of the Employees Provident Fund (EPF), a step which would also give the much needed boost to the Colombo stock market.

EPF which is the largest retirement benefit scheme of the country recorded a total investment portfolio of Rs. 405 billion last year but over 80 percent of the total investments were in treasury bonds. Although the listed equity portfolio increased by 96 percent in 2005 it still remained at 0.7 percent of the total EPF investment portfolio.

Labour Relations and Foreign Employment Minister Athauda Seneviratne speaking at the launch of the EPF's new website on Monday said that the Government is looking at the possibility of increasing the share of EPF invested in the stock market.

"However, EPF is a fund which determines the future of millions of working people in Sri Lanka. Therefore, we cannot merely focus of obtaining high returns. We should also select investment instruments with acceptable level of risk. Therefore, we need to study and have discussions with all the stakeholders before further increasing the investments in the stock market," Seneviratne said.

The Administrative aspect of the EPF is handled by the Labour Department of Sri Lanka whilst the management of the funds is by the EPF department of the Central Bank.

The Minister also said the Government has identified the real estate sector as a potential area of investment which can give higher returns.

"At the moment we are studying how the funds of retirement benefit schemes of other countries are managed effectively. We have also requested the International Labour Organisation to submit us a detailed report on how such funds are administered and managed in other countries," Seneviratne said. Earlier a major share of EPF was invested was in Government Rupee Loans - a long-term off-market instrument.

Last year that portfolio was recorded at 14%. Since 1997 the total investments in Treasury bonds - a long-term marketable investment instrument, has expanded remarkably. The average listed equity portfolio increased to Rs. 2,335 million last year. A senior official told the Daily News that this was in keeping with the EPF's diversification strategy.

Stock analysts are of the view that institutional funds such as EPF should be more active in the Colombo Stock Exchange which would help bring stability to the market even in times of political turbulence.

The total realised return from the EPF's listed equity portfolio amounted to Rs. 908mn in 2005. The major portion of the returns realized from the equity portfolio arose from capital gains, which amounted to Rs. 817 million in 2005. A senior official said that by monitoring the market conditions, EPF capitalized on the market opportunities with long-term investments in eight fundamentally sound stocks.

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New EPF website launched

The Employees Provident Fund of the Central Bank and the Department of Labour have jointly developed a website for the EPF (www.epf.lk) that provides a wide range of information about the fund in all the three languages. This website marks an important milestone in the Fund fulfilling a long felt need by employers, members and the public.

This website provides facilities to download all the necessary forms relating to EPF. The website also consists of FAQ section, general information on how to become members, how to send contributions and other information such as refunds and loans.