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The Pension Fund Regulatory and Development Authority (PFRDA) will Thursday open the commercial bids for selection of eight pension fund managers for managing the corpus under the NPS (private sector).
The pension regulator had early this year gone in for an auction route to decide on the pension fund managers who will get to manage the New Pension System (NPS) corpus of private sector employees and also public sector employees who voluntarily opt for this product.
AUCTION ROUTE
The auction route is a departure from the earlier revised process of September 2012 which allowed any technically qualified fund management entity to enter the ring so long as they are ready to work with fee cap of 0.25 percent of the assets under management.
Having a system of bidding to bag a mandate for fund management is a return to a "licence raj", say some fund managers in private.
INCENTIVISE DISTRIBUTION
An auction system may be a race to the bottom for pension fund managers aspiring to make the cut. The others will have to match the "L1" (lowest fee quoted) and do business within this fee structure. PFRDA has not specified any floor or a cap for the fee structure, industry sources said.
An increase in fund management fee to 0.25 percent from 0.0102% led to spurt in assets under management for NPS-private to about Rs 2,600 crore now from a level of Rs 400 crore in September 2012
Many private fund managers want a fee structure that would incentivise distribution and help in market development for NPS as a mass retail product.
The fact that any mandate to manage such funds will be valid for a period of only five years is another worrying factor for the aspirants.
Just like banking licences, they would prefer to have an open-ended arrangement to manage the pension funds.
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