According to BSE, a well diversified portfolio would not only be a balanced portfolio in terms of the risk profile, but would also be able to generate returns far in excess of those earned with investment in debt securities only. "By virtue of being long term investors, pension funds also are immune to cyclical risks that may otherwise sometimes hit the equity investors," the stock exchange noted. At the same time, Securities and Exchange Board of India (Sebi) has suggested the government allow EPFO (Employee Provident Fund Organisation) to invest up to 15 percent of their corpus in equities and mutual funds.

Besides, Sebi has recommended that members of EPFO earning over 6,500 per month should be offered an option to invest part of their corpus in a MF product of their choice. It has also been proposed by Sebi that tax benefits should be given for pension schemes launched by mutual funds.

Noting that objectives of investing in EPFO is long term saving, Sebi has said that the current investment pattern and norms preventing investment of EPFO in equity and equity-oriented schemes be modified to allow such investments. As per Sebi's estimates, if even 5 percent of the total pension fund is diverted towards equity mutual funds, it may result in new inflows of about 27,300 crore from the existing corpus and 4,000 crore annually from fresh contribution to EPFO.

Looking at various parameters for investor protection, the market watchdog feels that EPFO should be allowed to approve eligible schemes for investments and a specific age limit could be prescribed to be able to exercise such option. As per BSE, "while safety of the investment and returns is and should remain the highest priority, the pursuit of higher returns must not be lost sight of".

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