Investment fund may get managers

The government is likely to appoint UTI, SBI Mutual Fund and Life Insurance Corporation MF for managing the recently-created National Investment Fund (NIF) for a period of two years.

The Cabinet had approved the structure of the NIF last week. The investment, into which the disinvestment proceeds of the government will flow, is not to be in the nature of either the Employees Provident Fund Organisation or the Central Road Fund, both of which have legislative backing.

The disinvestment proceeds would first be directed into the Consolidated Fund of India and then transferred to the fund managers through the chief executive officer of NIF and the department of disinvestment.

The CEO would formulate an investment strategy for NIF based on the recommendations of an advisory board, to ensure that the government had a hands-off approach in terms of the actual investment to be made by the fund managers.

``By not conceiving NIF on the lines of EPFO or CRF, the government will be able to offer the appropriate levels of discretion to the fund managers," said an official.

The other possibility of structuring NIF as a mutual fund is not feasible since Securities and Exchange Board of India (SEBI) guidelines stipulate that a mutual fund scheme should have not less than 20 investors, with each investor owning not more than 25 per cent share of the corpus. "In this case, the only investor is the government," said an official.

The government would also be putting in a mechanism for regular review and monitoring of the functioning of the fund and emerging market trends so that sustainable returns acrue to the government without depleting the corpus.

More detailed guidelines specifying investment instruments and limits for investment in such instruments would be separately specified in the agreements to be entered into between the fund managers and the CEO of the NIF.

Seventy-five per cent of the annual income from NIF would be used to finance selected social sector schemes identified by the department of expenditure. The residual 25 per cent would be used to meet the capital investment requirements of profitable and revivable central public sector enterprises.

---

Fund-a-mentals

UTI, SBI Mutual Fund and Life Insurance Corporation MF may get the job for two years

The disinvestment proceeds will first be directed into the Consolidated Fund of India and then transferred to the fund managers through the CEO of NIF and the disinvestment department

The CEO will formulate an investment strategy for the NIF based on the recommendations of an advisory board

A mechanism for regular review and monitoring of the fund's functioning and emerging market trends will also be put in place