195th Meeting of the Central Board of Trustees of EPFO Appoints 4 Fund Managers:
State Bank of India, Reliance Capital Asset Management, HSBC Asset Management (India) Pvt. Ltd. and ICICI Securities Primary Dealership Ltd.
To Manage EPF Corpus;
Performance to be Reviewed After One Year
The 195th meeting of the Central Board of Trustees, Employees’ Provident Fund, which was the twelveth regular meeting of the present Board, was convened at a short notice in New Delhi on Thursday. The Board approved the selection and appointment of the four new fund managers for managing the EPF corpus for a period of three years effective from 01.09.2011. The State Bank of India would continue as fund manager of EPF corpus till 31.08.2011.
The Central Board of Trustees (CBT), the apex decision-making body of the Employees’ Provident Fund Organisation (EPFO) on Thursday decided to appoint State Bank of India (SBI), Reliance Capital Asset Management, HSBC Asset Management (India) Pvt. Ltd. and ICICI Securities Primary Dealership Ltd. as four fund managers for its Rs.3.5 trillion pension fund corpus. “The CBT after consideration of the recommendations of the Finance and Investment Committee approved four fund managers for managing EPFO funds for a period of three years beginning 1 September 2011,” Labour and Employment Minister Mallikarjun Kharge said after the meeting. Though the appointment is for three years, their performance will be reviewed after one year. CBT will decide on retaining them for the full three years based on that. "We have taken a decision that for one year we will see their performance. After completion of one year, based on their performance they will be asked to continue," the Minister Shri Kharge explained. Except for ICICI Securities, the other three have worked with EPFO earlier. “We have followed the procedure and rating agency CRISIL has helped us in the selection process. We believe these fund managers will give us a better yield,” the Minister added. The selection procedure was based on technical and financial bidding parameters, he said, when asked why ICICI Prudential was left out.
Between 17 September 2008 and 31 March 2011, the composite performance summary showed that ICICI Prudential AMC provided a cumulative interest yield of 8.72%. SBI gave 8.61%, HSBC 8.64% and Reliance Capital 8.57% on funds invested in debt instruments, including government securities and bonds. Earnings are expected to improve with the appointment of the fund managers, Labour and Employment Secretary Prabhat C. Chaturvedi said. While selecting fund managers, CBT gave 20% weight to financial quotations and 80% to technical parameters, CPFC Shri Samirendra Chatterjee said.
Eleven bidders had initially expressed interest, of which only 10 were eligible for Request for Proposal (RPF) documents. The selection committee sought the approval of the Central Vigilance Commission as a “precaution”, said Shri Chatterjee.
Of the 10 companies shortlisted only five qualified on technical scores of 65 percent– State Bank of India, HSBC Asset Management (India ) Private Ltd., Reliance Capital Asset Management Ltd., ICICI Securities Primary Dealership and ICICI Prudential Asset Management Corporation Ltd. after thorough evaluation of the technical bids whose financial bids were then opened . The other companies which were in the race for managing the EPFO funds were Kotak Mahindra Asset Management Company, Security Trading Corporation of India Limited(STCI), UTI Asset Management Company, Birla Sun Life Asset Management Company and Franklin Templeton Asset Management (India) Pvt. Ltd.
The EPFO had appointed multiple fund managers for the first time in July, 2008, for earning better rate of return on deposits for its over 4.72 crore subscribers. Before that, SBI was the sole fund manager for the retirement fund body since its inception in 1952. Of the total corpus of Rs.3.5 lakh crores (trillion) and an incremental fund of approx. Rs.60,000 crore per year, 35% will be managed by SBI, 25% by ICICI Securities and the remaining 40% will be managed equally by Reliance and HSBC.
The Board had earlier approved a proposal for appointment of Custodian of Securities of EPFO. This measure was taken to separate the custodial services from the Fund managers to bring further transparency in the management of EPFO corpus. The Board will finalise the appointment of New External Concurrent Auditor of Portfolio Managers of EPFO to audit the investment made by the multiple fund managers in its next meeting.
The above decisions were taken under the Chairmanship of Shri Mallikarjun Kharge, the Union Minister of Labour and Employment and Chairman, CBT (EPF). Secretary (Labour & Employment) and vice-Chairman of the CBT (EPF) Shri P. C. Chaturvedi , and Shri Samirendra Chatterjee, Central Provident Fund Commissioner also attended the meeting along with members from Employers’ and Employees’ representatives and State Governments.