New questions over investment policy disclosure of Sri Lanka’s EPF

ECONOMYNEXT- Sri Lanka’s central bank will not publish a newly devised investment policy on Employees Provident Fund of private sector worker savings it manages, an official said, raising questions on the level of public disclosure required over its policies and operations.

In an apparent reversal of past practices an investment policy statement of Sri Lanka’s Employees’ Provident Fund, a pension fund managed by the state, will not be published, but only some guidelines.

“The investment policy is an internal document, so we are not publishing it in total but certain guidelines we have already made available,” Deputy Governor H A Karunaratne told reporters in Colombo at the last media conference of the agency.

It is not clear what ‘certain guidelines’ are. The EPF websites’ Fund Management’ page says that monies will be invested in securities and corporate instruments.

The webpage was last updated in April 2019, and now says the fund will be innovatively managed.

Before the update, the site said funds will be invested in ‘fundamentally sound listed and unlisted equities and high credit worthy corporate debt instruments’ as well as reverse repurchase agreements.

A new Investment Policy had been under formulation since 2018.

In May 2019, then-Governor Indrajit Coomaraswamy told reporters that the new Investment Policy Statement was being finalized, with some elements still being added to it.

In January 2020, Karunaratne said the Investment Policy has now been approved by the monetary board.

In the past however an Investment Policy Statement has been made available to the public, though not as detailed as policies made public by public pension funds elsewhere.

Top pension funds in the world which are among the largest institutional investors in financial markets, disclose not only the broad investment policies but detailed investment approaches for different asset classes and also benchmarks.

Some, such as the US Social Security and Singapore’s Central Provident Fund invest only in government bonds.

Among mixed investment funds, the California Public Employees’ Retirement System (CALPERS), one of the world’s top ten with 402 billion US dollars in assets, publishes its investment policies as well as detailed strategies on portfolio management .

Australia’s Super, which is another top 10 fund in the world, not only provides investment strategies, but also allows Super members to personally make decisions on their investments.

Japan’s Government Pension Investment Fund publishes an Investment Policy Statement similar to the one published in the past by the Central Bank of Sri Lanka.

Investments of the EPF have come under scrutiny after forensic audit reports showed questionable investment strategies and weak control.

Some investments had been made violating the Investment Policy Statement and Investment Committee approval, the audits said.

The EPF had been managed without complete paperwork, the audits had also revealed.

In 2018, the EPF had returned 9.54 percent, at a time when most local funds faced falling returns.

However, some did better than the EPF like the CAL Income Fund which returned 12.14 percent, First Capital Money Market Fund with a 13.34 percent return and JB Vantage Money Market Fund’s 12.05 percent return.

Download: Text of an earlier policy statement published by the EPF. (Colombo/Feb10/2020)

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