The government on Thursday allowed trustees and managers of the non-government provident, superannuation and gratuity funds to invest up to 15 per cent of these in stocks.
The move is intended to help generate higher returns for subscribers to these funds. Until now only 5 per cent of these funds could be invested in equities, that too on a limited number. It is also expected boost sentiments in the stock market.
The new investment pattern comes into force on April 1, 2009, after which up to 15 per cent of private PF money can be invested in shares of such companies that have been granted derivatives trading on the Bombay Stock Exchange and the National Stock Exchange, a finance ministry notice said.
The notice said the funds could also be invested in two new instruments — rupee bonds of multilateral funding agencies and some money market mutual funds.
Government organisations have also shown interest in the new investment pattern. Pension Fund Regulatory and Development
Authority, the regulator for the new pension scheme for government employees, is also keen on joining the race.
“We will adopt it from the beginning of the next financial year when it gets applicable,” said D Swarup, chairman of the regulatory authority.
The Employees’ Provident Fund Organisation, that recently permitted private sector fund managers to manage its incremental accretion, strictly invests into government securities as of now and the trustees will have to take a call on whether they will permit investment in direct equities.
“If NPS (New Pension Scheme) generates higher return adopting the new investment pattern, its experience might guide the EPFO trustees’ to think of adopting it,” said a government official, who did not wish to be named.