Private sector National Pension System (NPS) subscribers would have another asset class to choose for investing their investments with the Pension Fund Regulatory and Development Authority (PFRDA) notifying a set alternative investments, where a maximum of 5 per cent investment will be allowed.
The alternative investment classes will be offered along with the three other existing classes – Equity (E), corporate bond (C ) and government debt (G).
The alternative investments permitted are:
Commercial mortgage bases securities or residential mortgage-based securities
Units issued by Real Estate Investment Trusts regulated by Securities and Exchange Board of India (SEBI)
Asset backed securities regulated by SEBI
Units issued by Infrastructure Investment Trusts regulated by SEBI
Alternative Investment Funds (AIF Category-I and II registered with SEBI
Investors can choose a mix of these asset classes with separate maximum caps allowed for each. While the alternative investment can go up to 5 per cent, NPS allows an investor a maximum equity exposure of 50 per cent, while investment in corporate bonds and government debt can go up to the entire 100 percent of the invested amount.
Investment in the new alternative investment asset class has been permitted with effect from October 1, 2016.
However, government sector NPS subscribers will have to wait for being given the option of investing in the alternative assets since the PFRDA notification says that these would be thrown open only for private sector NPS subscribers.
The move is part of the efforts of the pension regulator to provide exposure to a few asset classes that are perceived to carry higher risk but also has the potential to generate higher returns.