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EPFO bars portfolio managers from investing in group companies

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Indias Employees Provident Fund Organisation has barred its private sector asset managers from investing the retirement corpus in group companies as some cross investments in recent past has been found to have led to some value erosion.

The apex retirement body floated a Request for Proposal last week as four mutual funds, including Aditya Birla MF, SBI MF, Reliance Nippon Life Asset Management and UTI MF bid to take up the role of portfolio managers, three market sources told ET.

Individual funds could not be contacted immediately for comments.

"We have floated RFP to select portfolio managers," said Prabhakar Banasure, amember with Centre Board of Trustees (CBT) CBT member confirming the matter. "Some mutual funds have already bid for it and we will finalise it towards the end of the month."

“This time, we have added a few new benchmarks like banning investment in portfolio manager's group company," he told ET.

Last financial year, SBI MF, Reliance MF, HSBC AMC, ICICI Securities Primary Dealership and UTI AMC were fund managers of the EPFO. They managed thousands of crores on behalf of the countrys largest debt investor.

Reliance AMC took a call to invest in Reliance Capital, where the investment call went wrong, sources said. EPFO has an exposure of about Rs 2,500 crore in Anil Dhirubhai Ambani group companies of which a fifth were in Reliance Capital securities.

“This was the genesis of such new provision, which may also change once the crisis eases,” said one of the persons cited above.

About a month ago, rating company CARE downgraded Reliance Capitals debt securities to “BBB” from A citing defaults by two of its subsidiaries — RelianceRead More – Source
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