The Employees’ Provident Fund Organisation is keen on investing in a fresh issue of the exchange traded fund of central public sector enterprises (CPSE- ETF), provided it is offered at a good discount. It is also seeking lower management fees.

“We are prepared to invest in the CPSE-ETF. But, we want a good discount of 5-6 per cent, on the lines of the one offered to Life Insurance Corporation of India when it had invested. This may be possible when a new tranche of the ETF is launched,” said a senior EPFO official.

Finance Ministry sources said the EPFO, India’s largest retirement fund manager, has not been keen on investing in the current tranche of the CPSE-ETF despite several rounds of discussions.

The sources added that the EPFO, which invests in two ETFs of SBI Mutual Fund, cites the low management fees of 7 paise per ₹100 as one of the justifications for doing so. In contrast, Goldman Sachs Asset Management (India), which has been managing the CPSE-ETF, charges 49 paise per ₹100. (It was bought out by Reliance Capital on Wednesday — see adjacent report.)

However, EPFO officials insist that the quantum of fund management fees is only one of the issues. The real concern, according to them, is the absence of a discount of the kind offered to LIC when it invested in the CPSE-ETF.

The Department of Disinvestment in the Finance Ministry is working on a fresh issue of the CPSE-ETF and is waiting for clearance from the market regulator, the Securities and Exchange Board of India. Sources in the Department of Disinvestment said it is likely to be launched by early next year.

On August 6, after years of resistance against taking a plunge in Dalal Street, the EPFO entered the equities market with plans to invest about 5 per cent of its incremental fund flows, or roughly ₹5,000 crore of its ₹6.5 lakh crore corpus, in ETFs this fiscal year. Under the plan, 75 per cent of its investments will be put in the SBI-ETF Nifty and the rest in the SBI Sensex ETF. It is understood to be investing about ₹400 crore every month in these two ETFs of the SBI Mutual Fund.

Earlier, in March 2014, the Finance Ministry launched the CPSE-ETF, comprising stocks of 10 public sector units including ONGC, GAIL (India) Ltd, Coal India Ltd, Rural Electrification Corp. Ltd and Oil India Ltd, raising about ₹3,000 crore.

Since then, the ministry has been pushing the EPFO to put its money in the ETF, arguing that it is a safe investment comprising blue-chip PSU stocks.