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EPFO Eyes New Investment Avenues: Up to 3% to AIFs
29 Oct
Summary
- EPFO plans to invest up to 3% of new annual accretions into AIFs.
- The proposal aims for diverse investments beyond traditional debt.
- Investments may be routed through NIIF and SIDBI's Startup Fund.
The Employees' Provident Fund Organisation (EPFO) is developing rules for investing in alternative investment funds (AIFs) and startups, five years after the government permitted such investments. A proposal discussed on Thursday, October 22, 2026, suggests allocating up to 3% of the EPFO's new annual accretions to Category I and Category II AIFs, which are regulated by SEBI.
This strategic shift aims to diversify EPFO's substantial retirement savings, which amount to approximately Rs 30 lakh crore for nearly 30 crore members, beyond conventional debt instruments. The move could potentially unlock higher long-term returns, although it also introduces market risks. As an initial approach, the EPFO is considering channeling these investments through established entities such as the National Investment and Infrastructure Fund (NIIF) and SIDBI's Startup India Fund of Funds 2.0.
The proposal is slated for review by the Central Board of Trustees (CBT) in November. If approved, this allocation would fall within the existing 5% limit for asset-backed and trust-structured investments. Category I AIFs focus on development-oriented sectors like startups and SMEs, while Category II AIFs include private equity and real estate funds. Strict risk protection mechanisms, including corpus minimums and exposure limitations, are expected to be implemented.
