Trade unions today said they will oppose the Finance Ministry’s proposal of investing a part of retirement fund body EPFO’s huge corpus of over Rs 5 lakh crore in the exchange traded funds (ETF) of central public sector undertakings.

Trade unions have been opposing the idea of EPFO fund exposure to equity as it involves high risk of capital erosion.

“Investment of funds in ETF of CPSU is as vulnerable and risky as an equity investment. We are opposed to any such proposal,” All-India Trade Union Congress Secretary D L Sachdev told PTI.

Sachdev, who is also an EPFO trustee, added: “We are against any kind of investment in equity as it entails huge risks.”

The Finance Ministry has reportedly asked Employees’ Provident Fund Organisation’s (EPFO) to consider investment of a part of its corpus in ETF of public sector undertakings.

Another EPFO trustee and All-India Secretary of Bharatiya Mazdoor Sangh B N Rai said: “This type of investment is risky.

We would oppose this when it comes before the Central Board of Trustees (CBT).”

The CBT is the apex decision making body of EPFO and without its approval the body cannot invest money in any kind of instrument.

ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Last week the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved the setting up of a Central Public Sector Enterprises (CPSE) Exchange Traded Fund (ETF).

This CPSE-ETF would comprise CPSE stocks (from among the listed CPSE stocks). Each stock would have a fixed weightage in the basket.

The composition of the basket, the launch of the New Fund Offer, the discount to be provided and other issues relating to contribution and pricing of the ETF would be decided by the Empowered Group of Ministers later.

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