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NPS May Get to Invest in Private Equity and Venture Capital Sector
With a view to diversify the portfolio, the Pension Fund Regulatory and Development Authority (PFRDA) is very actively looking to invest some money in private equity and venture capital sector, chairman of pension fund regulator, Mr Hemant G. Contractor said at an ASSOCHAM event.
"We are envisaging a phased roll-out of new products in which the industry can invest and we are very actively looking at putting aside some money in private equity and venture capital area also, this is something we are very actively looking at," said Mr Contractor.
"We have been alive to the need for diversifying the asset base of the pension industry as in last few years we have added new investment instruments coming into the market in which the pension funds are deployed and we have been permitting investment in new securities as well and going forward.
I am quite sure we will be looking very positively at investing in private equity and venture capital market aswell," added the PFRDA chairman.
Mr Contractor also informed that PFRDA was going through the report submitted by Mr G.N. Bajpai led committee appointed by the pension regulator to look into the whole issue of investment pattern of pension funds.
"It basically deals with the current investment pattern that NPS has been following, fund managers, fee and commission structure and a gamut of investment related activities," said Mr Contractor while sharing details of the report.
"We will be putting up to the board the recommendations which we feel are worth implementing and that should be I think by next month or so," he added.
"We are currently following a directed investment regime while they are suggesting us to move to prudential management regime where the choice of decision regarding investment will be left more to the fund managers.
Who are right now not in a position to do so, as such they are proposing a phased transition from current regime to the new regime which might take about 2-3 years in PE & VC sector while complete roll out might take about 4-5 years," further said the PFRDA chief.
"Some of the recommendations may be implemented immediately," he added.
"Our pension fund managers need to build up some skills for putting in money in private equity and venture capital as right now the level of skills is not of the order in which they can make an informed decision about investing in these assets," said Mr Contractor.
"The industry can probably do some hand-holding in the form of making them more literate about these kinds of investments," he said.
"PE and VC for the pension industry is quite new, so we need to do some hand-holding and explain to investors especially our fund managers as to what they are getting into and what kind of competencies exist in this space, what kind of strategies to adopt and what kind of exit options exist as these kind of things are still fairly new issues for pension fund managers," added Mr Contractor.
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