EPFO bars portfolio managers from investing in group companies
The apex retirement body floated a ‘Request for Proposal’ last week for taking up the responsibility of portfolio managers.
The apex retirement body floated a ‘Request for Proposal’ last week as four mutual funds, including Aditya Birla MF, SBI MF, Reliance Nippon Life Asset Management and UTI MF bid to take up the role of portfolio managers, three market sources told ET.
Individual funds could not be contacted immediately for comments.
"We have floated RFP to select portfolio managers," said Prabhakar Banasure, amember with Centre Board of Trustees (CBT) CBT member confirming the matter. ‘"Some mutual funds have already bid for it and we will finalise it towards the end of the month."
“This time, we have added a few new benchmarks like banning investment in portfolio manager's group company," he told ET.
Last financial year, SBI MF, Reliance MF, HSBC AMC, ICICI Securities Primary Dealership and UTI AMC were fund managers of the EPFO. They managed thousands of crores on behalf of the country’s largest debt investor.
Reliance AMC took a call to invest in Reliance Capital, where the investment call went wrong, sources said. EPFO has an exposure of about Rs 2,500 crore in Anil Dhirubhai Ambani group companies of which a fifth were in Reliance Capital securities.
“This was the genesis of such new provision, which may also change once the crisis eases,” said one of the persons cited above.
About a month ago, rating company CARE downgraded Reliance Capital’s debt securities to “BBB” from ‘A’ citing defaults by two of its subsidiaries — Reliance Home Finance (RHFL) and Reliance Commercial Finance (RCFL). CARE also said it would keep the firm on credit watch with developing implications. The same company was rated triple-A (SO) a few years earlier.
The retirement fund is not mandated to invest in any corporate bonds rated below AA+. The central board of trustees prodded portfolio managers seeking explanation behind this move.
“Portfolio managers have met Reliance Cap management to get clarity on repayments, which has added some confidence to the board of trustees,” said an executive involved in the process.
EPFO is expected to finalise new set of portfolio managers by end of this month.