Employees Provident Fund (EPF) performs better than Unit Trusts
Posted on November 6th, 2012

By Forward Contract – Sunday Observer

The decrease in the Unit Trust valuations as at June 30, 2012 from that as at June 30, 2011, in percentage terms, has been much higher than the decrease recorded by the EPF in its equity portfolio. Research has revealed that the net asset value of Unit Trust investments has plunged by over 25 percent during the year ending June 30, 2012, with the value of all investments of the Unit Trusts decreasing to Rs. 20.1 b by end June 2012, from Rs.26.9 b at end June 2011. Accordingly, the value of investments of the Unit Trusts has decreased by a sum of Rs 6.8 b.

As per the data available, such unrealised loss, just like the unrealised loss in the case of EPF’s share portfolio too, has been mainly due to the loss in value of stock market investments by private Unit Trusts. Analysts therefore have concluded that this situation clearly suggests that the criticisms that have been levelled against the EPF by certain politicians and trade unions about the unrealised loss in value of the EPF’s portfolio of investments in the Colombo Stock Exchange, have been unfounded and politically motivated.

Since of late, a massive campaign had been launched by a group co-ordinated by the anti-China UNP MP, Harsha de Silva to force the Government to place the EPF funds under the control and management of the private sector Unit Trusts. As a part of that campaign, recently, Murtaza Jafferjee of JB Stockbrokers joined this group and made a serious pitch for the hand over of the EPF portfolio to the private sector Unit Trusts to manage, on the basis that the Unit Trusts would be able to generate at least one percent more than the returns gained by the EPF management. However, the latest data that indicates that the performance of the private sector Unit Trusts have been much worse than the performance of the EPF management, is bound to embarrass this group, and expose their regular and vociferous claims as being baseless.

As set out in this column, in the recent past, the ‘break-up-the-EPF’ mafia have stepped up their campaign that the EPF fund must be broken up into parts and handed over to the private sector Unit Trusts for management. After Murtaza Jafferjee’s comments last week, the private sector Unit Trusts received a boost and were shown off as the gurus in investment and were offered as the alternative fund managers who could take over EPF’s portfolio management function. However, for their bad luck, barely a week has gone by, and the grand showmanship of this mafia has come to zero, with the pathetic performances of the Unit Trust being publicly exposed.

This revelation would mean that the mafia will now have to develop a new story as their justification for the handing over of EPF funds to the private sector unit trusts. This set back in the Unit Trust results is also likely to discredit the bold recommendation made by the US-based Consultants, McKinsy and Co., who too had advocated the shift of EPF funds to the private sector unit trusts.

While it is likely that the current revelations which are causing a huge embarrassment to these groups and their media backers, would silence them for a short period of time, it is certain that before long, they will probably surface with another canard to drum up support for their ‘break-up-the-EPF’ mission.

In that backdrop, the EPF would do well to make use of this opportunity to raise this matter in the relevant circles, including the trade unions that had criticised the EPF investments, and convey the true picture relating to investments in the country’s stock market.

To do so, they must create greater awareness regarding the concept of investing in shares and securities on a portfolio basis, so that the majority of the people in the country would be able to understand and appreciate the nature of portfolio investments.

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