CB says EPF investments are long-term and of value

Thursday, 3 November 2011 01:02 - - {{hitsCtrl.values.hits}}

The Central Bank yesterday issued a fresh statement defending the stock market investments made by the Employees Provident Fund (EPF), which has come under criticism from the Opposition and others.

The statement said in an era where interest rates are likely to decline in the medium to long term, the EPF has taken the view that returns from investments in Government securities and debt instruments only would not provide sufficiently high returns across such a time horizon.

Therefore, the need to diversify the EPF investment portfolio has been considered important, while maintaining the overall safety and stability of the fund.

In that background, over the recent past, the EPF has made several investments in various listed corporates through the Colombo Stock Exchange, and also in selected unlisted corporates, on the basis of, inter alia, intrinsic value of the company, its growth prospects, the possible enhancement of share value in the medium to long-term, its governing structures, the viability and prospects of the industry, the quantity of shares available, the future plans, the impact of the growing economy on the company, etc.

Such shares in various corporates have been gradually accumulated over the past several months in a methodical and professional manner.

Other than in the case of a comparatively fewer transactions within the smaller trading portfolio (which has also yielded capital gains of several hundred million rupees), the larger portion of the share acquisitions over the recent past has been made with the intention of holding over the medium to longer period.

That is why even at the height of the bullish trend of the share market when the ASPI reached its peak in the latter part of 2010 and early 2011, resulting in significant unrealised gains in the EPF portfolio, the EPF Investment Committee took the view that it would be best to hold many of the stocks in its portfolio over the longer period, since it was considered likely that the gains in the longer timeframe would be substantially higher than the unrealised gains that were recorded at the last peak of the market.

In that background, the current concerted effort to highlight the decreases in values of certain selected stocks in the wide portfolio of the EPF during the period of a temporary slump of the market is obviously a mischievous endeavour carried out by certain persons who are guided by ulterior motives, to discredit the EPF to further their own agendas.

The EPF is confident that its sound investment decisions will be proved pragmatic, sensible and profitable over the longer time frame, and therefore wishes to advise its millions of stakeholders not to be misled by this type of vituperative and negative propaganda.