The Employees’ Provident Fund Organisation (EPFO) is working on guidelines to invest in startups and alternative investment funds (AIFs), five years after the government approved the retirement fund body’s entry into these investment avenues, reported The Times of India.
The proposal is expected to be placed before EPFO’s central board of trustees, headed by Labour Minister Mansukh Mandaviya, in November.
The move follows a September letter from the Department for Promotion of Industry and Internal Trade (DPIIT) seeking EPFO’s participation in the recently launched Startup India Fund of Funds 2.0.
Initially, EPFO is considering routing investments through institutional entities such as the National Investment and Infrastructure Fund (NIIF) and the Small Industries Development Bank of India’s (SIDBI) Startup India Fund of Funds 2.0.
Under the investment pattern notified by the finance ministry, EPFO can allocate up to 5 per cent of its fresh accretions to asset-backed and trust-structured investments. However, it has not yet invested in Sebi-regulated Category I and Category II AIFs.
Category I AIFs typically invest in startups, small businesses, infrastructure and venture capital, while Category II AIFs include private equity, real estate and private debt funds.
The proposed guidelines are expected to include safeguards such as a minimum corpus of ₹100 crore for eligible AIFs, limits on exposure to individual funds, restrictions on investments in foreign-incorporated entities and requirements to ensure the independence of fund managers, according to The Times of India report.
EPFO manages around ₹30 trillion in retirement savings for nearly 300 million members.
