EPF contemplates divesting some capital market investments
02 Feb 2015 - {{hitsCtrl.values.hits}}
By Chandeepa Wettasinghe The Employees’ Provident Fund (EPF), the largest state-run private sector pension fund may divest its holdings in commercial banks and certain other companies trading in the Colombo Stock Exchange, newly appointed Central Bank Governor Arjuna Mahendran told a recent forum.
“I wouldn’t want to jump the gun and divest these immediately, though it is desirable, because we have to have more liquidity in the public markets for these bank shares, and indeed all the other shares which have been acquired by the government through the EPF in the last few years,” Mahendran t old a Post Budget Seminar organized by Ceylon Chamber of Commerce last week.
He was responding to criticism leveled by Aitken Spence Director Dr. Parakrama Dissanayake, who was in the audience, of the Central Bank as the regulator, controlling the listed commercial banks through EPF and several other state-run entities.
Mahendran agreed t hat such investments constitute a blatant conflict of interest, and noted that investigations would be launched into such investments.
According to section 2.6.2.2 of the Investment Policy Statement and Standards of Professional Conduct of the EPF, the fund cannot invest in the banking sector and equities of financial nature, while only blue chip companies could be invested in, to minimize risk.
Apart from the banking sector stocks, EPF made highly controversial investments in companies such as Ceylon Grain Elevators, Bairaha Farms, Galadari Hotel and Light House Hotel, at premium rates, during the past few years.
“Now that the government holds these shares, which they shouldn’t have in the first place, unravelling that would have to involve institutions like the SEC. Now that Thilak Karunaratne is in the saddle, I’m sure he would do an excellent job in unravelling whatever stuff that went on behind the scenes,” Mahendran said.
Specially during 2010 to 2012 period, allegations were leveled against certain parties and high net worth investors of dumping pumpedup shares to EPF at premium prices.
Policy Planning and Economic Development Deputy Minister Dr. Harsha de Silva while in the opposition, in 2011, claimed that over Rs.270 million was lost in just one week from equity dealings.
Yet, according to a Central Bank statement in November 2014, EPF had accrued Rs.6.7 billion in profits from share dividends, debenture interest and capital gains since January 2014.
By Chandeepa Wettasinghe
