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On the heels of allowing private pension monies to flow into alternative investment funds (AIFs), the pension regulator PFRDA has made a pitch for Government pension monies to flow into such investment vehicles.
“We have taken it up very strongly with the Government to allow 2 per cent of Government pension monies to flow into AIFs every year,” Hemant Contractor, Chairman, Pension Fund Regulatory and Development Authority (PFRDA), told BusinessLine on the sidelines of IVCA’s annual conclave here on Friday.
PFRDA had in mid-February allowed 2 per cent of private sector National Pension System (NPS) contribution to be invested in AIFs (only category-I and category-II funds registered with SEBI).
Contractor said at this event that ₹ 800-1,000 crore would be available annually for investments into AIFs if the Government were to accept PFRDA’s suggestion.
Currently, only non-Government pension monies are allowed to flow into AIFs.
Private sector pension monies account for only about 10 per cent of the incremental annual pension monies of about ₹ 35,000 crore flowing into the financial system.
Allowing private sector pension monies into AIFs was part of PFRDA’s attempts to diversify the portfolio of investments and in line with the Bajpai Panel’s recommendations.
In the recent years, PFRDA has as part of risk diversification strategy expanded the repertoire of instruments into which pension monies could be invested.
The new instruments include infrastructure debt funds, Basel-III compliant bonds of banks, real estate investment trusts (REITs) and recently alternative investment funds such as private equity and venture capital funds.
The Modi-led Government had in early February this year asked PFRDA to ensure that a full range of investment products, including AIFs, be made available for Indians saving for their retirement.
The PFRDA chief also said that he would like to see more AIFs listed because of valuation reasons.
“As I understand not many funds are listed yet. This is one of the issues. We would also like to see more and more funds to get rated. Rating does give us some comfort”, Contractor said.
Industry views
Gopal Srinivasan, Chairman, TVS Capital and Vice Chairman, IVCA, lauded PFRDA’s initiative to allow 2 per cent of private pension monies to be invested in “meritocratically” decided private equity and venture capital funds (AIFs),
“Industry is thrilled. We all know that 43 per cent of global private equity money comes from government and private pensions,” Srinivasan said..
Pension assets
'Meanwhile, Contractor saw the size of pension assets growing significantly in the Indian economy from the current share of 8 per cent of gross domestic product (GDP).
“Over a period of time, pension assets will only be growing. It would not be a surprise if pension assets grow to 50 per cent of GDP by 2050,” he said.
Srivats.kr@thehindu.co.in
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