Government authorities are now considering the feasibility of permitting Sri Lanka’s Employees’ Provident Fund (EPF) to re-enter the stock market, couple of years after this fund has been branded as a dumping field for stocks and bonds.
This was major effort to heal the ailing economy and the down fall of Colombo stock market following the Easter terror.
The time is opportune for EPF to invest in the stock market which has been hit rock bottom at present, official sources attached to the management of the fund suggested following careful evaluation of stock market performances.
Even at present a sum of Rs. 90 billion from the EPF has been invested in the stock market and its current value is in the region of Rs. 74 billion causing a capital loss of Rs.16 billion, official sources said.
JVP MP Vijitha Herath noted that at this juncture of economic instability, state fund managers should not invest EPF money belonging to around 7 million private sector employees in the dwindling Colombo stock market.
He emphasized that instead of investing in the stock market, the Government should have invested EPF money in treasury bonds (TB) which provide an interest of 11.5 percent.
“As of now, the total investment of EPF money was only 4.5 percent and now the Government is planning to invest an addition 4 percent increasing the amount to 8.5 percent, he added.
However the Fund, as a long term institutional investor is seeking to capitalise on new market opportunities and instruments through a comprehensive investment diversification process, a senior Central Bank official revealed.
The stock valuations have hit all time low at present he said adding that this is the best time to re- enter the stock market.
The EPF’s fund management is undertaken by the Central Bank under its Monetary Board, which is chaired by the governor and several members, including from the Treasury and private sector. The Treasury secretary too is a member of the Monetary Board.
The governance structure of the EPF risk management was also strengthened through the establishment of an EPF Investment Oversight Committee in addition to the EPF Investment Committee to monitor investment activities.
With the assistance of the Asian Development Bank (ADB), EPF carried out a Business Review with the objective of streamlining and improving its current activities.
In addition, the actions pertaining to procuring a new ICT system to automate EPF activities were continued with the assistance of the World Bank, CB announced.