Sector regulator PFRDA is looking at allowing pension fund managers to invest up to 3 per cent of corpus in private equity (PE) to maximise return, and a decision in this regard is likely to be taken in 3-4 months.
“We are not considering investment of private sector fund in the venture capital (VC) and private equity at the moment. That would happen over the next 3-4 months. It’s on the drawing board,” Pension Fund Regulatory and Development Authority (PFRDA) Chairman Hemant Contractor told PTI.
“If at all we allow, it would be 2-3 per cent. It would essentially be for NPS money garnered from private sector,” he said. “This would help in diversifying the investment risk.”
Allowing investment into VC and PE is part of the recommendation of G N Bajpai Panel that had recommended greater flexibility to NPS subscribers for their investments.
Bajpai committee report deals with investment pattern that NPS has been following, fund managers, fee and commission structure and a gamut of investment related activities.
National Pension System (NPS) funds garnered from private sector can be invested only in government securities, corporate bonds and equities.
PFRDA has been alive to the need for diversifying the asset base of the pension industry and in past few years has added new investment instruments coming into the market in which the pension funds are deployed, he said.
Recently, PFRDA allowed Non-resident Indians (NRIs) to invest in National Pension System (NPS) to get a social security cover.
While RBI has communicated to PFRDA about NRIs being eligible to make such investments, the government will shortly come out with a clarification on Foreign Exchange Management Act (FEMA) guidelines to facilitate non-resident Indians to invest in National Pension System (NPS).
The move will also help to increase the subscriber base and expand the pension corpus in the private sector.
The current corpus under the National Pension System, including government employees is Rs 91,000 crore.