Is EPFO set to invest in startups, AIFs? Report says provident fund body is working on guidelines

The government allowed the Employees' Provident Fund Organisation (EPFO) to invest in alternative investment funds (AIFs) five years ago. Now, the provident fund body is working on rules about how it can invest in AIFs and startups, as per a Times of India (ToI) report.

A proposal to allocate up to 3% of the EPFO’s new annual accretions into the Securities and Exchange Board of India (Sebi)-regulated Category I and Category II AIFs was discussed in the investment committee (IC) meeting on Thursday (October 22, 2026), as per the TOI report. In September, the EPFO received a letter from the Department for Promotion of Industry and Internal Trade (DPIIT) requesting participation in the recently formed Startup India Fund of Funds 2.0.

EPFO may invest through NIIF and SIDBI

In the initial phase, the EPFO is considering routing investments through established institutions such as the National Investment and Infrastructure Fund (NIIF) and SIDBI’s Startup India Fund of Funds 2.0, the report says.


The proposal is expected to be taken up by the Central Board of Trustees (CBT), chaired by Labour Minister Mansukh Mandaviya, in November, as per the report.

If approved, the move would allow the EPFO to diversify part of its investments beyond traditional debt instruments and explore opportunities that could deliver higher returns over the long term. However, investments in AIFs also carry market risks.


Also read: EPF calculator: How your Rs 50 lakh retirement corpus can keep growing for 3 years without any PF contributions

How much money can the EPFO invest in AIFs?

According to the investment pattern notified by the Finance Ministry, the EPFO can invest up to 5% of its fresh annual accretions in asset-backed and trust-structured investments.

The news report also states that the retirement fund body has not yet invested in SEBI-regulated Category I and Category II AIFs.

The EPFO manages around Rs 30 lakh crore in retirement savings for nearly 30 crore members.

The proposed allocation of up to 3% of fresh annual accretions would be within the broader 5% investment limit, subject to the applicable rules and final approval, TOI stated.

What are Category I and Category II AIFs?

Category I AIFs are development-oriented funds that support sectors with positive economic spillovers, such as startups, small and medium enterprises (SMEs), infrastructure, social ventures, and venture capital.

Category II AIFs include private equity (PE) funds, real estate funds, and private debt funds that do not fit into Category I or III and do not use leverage or borrowing.

Having a strict mechanism of risk protection to protect workers' money against some unpredictable investment policy, there will be a minimum amount of corpus of Rs 100 crore in an AIF, limitation on exposure in one fund, bar on foreign incorporation, and very independent fund managers apart from their promoters, report states.