EPFO names SBI, 3 others to run 3.5-lakh-cr fund

NEW DELHI: SBI, ICICI Securities Primary Dealership (I-Sec PD), Reliance Capital and HSBC Asset Management Company have been appointed fund managers for the Employee's Provident Fund Organisation's more than 3-lakh- crore corpus for the next three years.
SBI will manage 35% of the funds, I-Sec PD will manage 25% while the other two will manage 20% each, Central Provident Fund Commissioner S Chatterjee said.

The four asset management companies were chosen by the Central Board of Trustees-the EPFO's top decision making body-out of five shortlisted by the EPFO's financial advisory committee. ICICI Prudential, the fifth contender, was dropped.

The performance of the fund managers will be reviewed after one year by the CBT and if they do not come up to expectations, they could be dropped, said labour minister Mallikarjun Kharge who also heads the CBT. "We have taken a decision that for one year we will see their performance. After completion of one year, based on their performance they will be asked to continue," Kharge said.

Among the five shortlisted companies, I-Sec PD quoted the lowest rate of 3 paise per annum for managing 10,000, according to an official. Reliance Capital quoted a rate of 4 paise per annum for managing 10,000, HSBC AMC quoed 36 paise and SBI qoted Re 1.

The EPFO had appointed multiple fund managers for the first time in July, 2008 for earning better returns on deposits for its 4.72 crore subscribers. The term of the four fund managers, ICICI Pru, HSBC AMC, Reliance Capital and SBI, appointed in 2008, expired on March 31 2011.

Asked about the reason for dropping ICICI Pru this time, Kharge said, "Whatever criteria fixed by the expert committee, in that I-Sec PD has come (selected), not ICICI Pru".

For determinig the best value bids, the EPFO gave 80% weightage to technical bids and 20% weightage to financial bids.

Replying to queries on the logic behind dropping the best performing fund manager, the minister said, that ICICI Pru may have performed well, but if it asked for more money than others it would go against its interest

ICICI Pru has quoted a service fee of 48 paise for managing 10,000 as compared to 3 paise by the the ICICI Securities Primary Dealership.

Other asset management companies that were in the race include Birla Sun Life, UTI, STCI, Kotak Mahindra and Franklin Templeton.