 "PFRDA tightens investment norms for private pension fund managers")
Tightening its norms for the private sector, in the National Pension System (NPS), the Pension Fund Regulatory and Development Authority (PFRDA) has barred fresh investments in equity mutual funds and exchange-traded funds (ETFs) from the corpus. It has also asked these fund managers to restrict their single-industry exposure to 15 per cent of NPS investments under all schemes.
PFRDA had issued these clarifications after pension fund managers had sought clarity on certain clauses of the investment management agreement for the private sector. “In terms of the revised investment guidelines for private sector NPS, fresh investments in equity-related mutual funds and ETFs are disallowed,” PFRDA said in a circular dated April 17.
According to PFRDA data, fund managers allowed to offer NPS are LIC Pension Fund Limited, SBI Pension Funds, UTI Retirement Solutions, ICICI Prudential Pension Funds Management, Kotak Mahindra Pension Fund and Reliance Capital Pension Fund. As on March 2, NPS had 4.5 million subscribers and a corpus of Rs 28,400 crore. About 0.2 million subscribers are from the private sector, while 2.7 million are from central/state governments. A total of 1.58 million subscribers are served by NPS-Lite, which is designed to ensure ultra-low administrative and transactional costs.
On rated asset-backed securities, PFRDA said these would be eligible for investments under ‘asset class-C’ (credit risk bearing fixed income instruments), provided these have a residual maturity of not less than three years and an investment grade rating from at least two rating agencies.
DIFFERENT BALLGAME
PFRDA had issued these clarifications after pension fund managers had sought clarity on certain clauses of the investment management agreement for the private sector. “In terms of the revised investment guidelines for private sector NPS, fresh investments in equity-related mutual funds and ETFs are disallowed,” PFRDA said in a circular dated April 17.
According to PFRDA data, fund managers allowed to offer NPS are LIC Pension Fund Limited, SBI Pension Funds, UTI Retirement Solutions, ICICI Prudential Pension Funds Management, Kotak Mahindra Pension Fund and Reliance Capital Pension Fund. As on March 2, NPS had 4.5 million subscribers and a corpus of Rs 28,400 crore. About 0.2 million subscribers are from the private sector, while 2.7 million are from central/state governments. A total of 1.58 million subscribers are served by NPS-Lite, which is designed to ensure ultra-low administrative and transactional costs.
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On the debt securities front, PFRDA said securities selected for investments should have a residual maturity period of at least three years from the date of investment by the pension fund manager. On the industry exposure of pension fund managers, PFRDA said this should be restricted to 15 per cent of all NPS investments, under all schemes. It added investments in equity should be restricted to five per cent (sponsor group companies) and 10 per cent (non-sponsor group companies) of the market value of a company's paid-up equity capital.
On rated asset-backed securities, PFRDA said these would be eligible for investments under ‘asset class-C’ (credit risk bearing fixed income instruments), provided these have a residual maturity of not less than three years and an investment grade rating from at least two rating agencies.
DIFFERENT BALLGAME
- Fresh investments in equity mutual funds and exchange-traded funds barred
- Fund managers to restrict single-industry exposure to 15% of NPS investments under all schemes
- Securities selected for investments should have a residual maturity period of at least 3 years from the date of investment by pension fund manager
- Asset backed securities would be eligible for investments under 'asset class-C', provided these have a residual maturity of not less than 3 years and an investment grade rating from at least two rating agencies