The government has allowed non-government provident funds, superannuation and gratuity funds to invest up to 5% of their investible surplus in alternate investment funds (AIFs) that support infrastructure, micro, small and medium enterprises (MSMEs), venture capital funds and social venture capital funds. This will unlock retirement savings for start-ups and small enterprises, and raise large sums for them if the Employees’ Provident Fund Organisation (EPFO) also adopts the new guidelines.
The EPFO manages more than Rs 12 lakh crore of retirement savings but the changes in the investment pattern announced by the finance ministry on Tuesday are only for non-government provident funds that manage the retirement savings of their workers inhouse. A senior EPFO official told ET that though this is a risky investment avenue, a proposal to this effect could be brought up for discussion at the next meeting of the central board of the trustees (CBT).
“We will have to seek approval from the central board of trustees of EPFO headed by the labour minister before investing up to 5% in AIFs as per the new investment pattern,” he said.