The Pension Fund Development and Regulation Authority (PFRDA) has broadened the investment universe of pension funds, allowing them to invest in the shares of the top 200 listed companies and in the initial public offering (IPO) of companies, among others.
This move could give the stock markets a boost, in the context of raising the limit on foreign direct investment (FDI) in the pension sector from 49% to 74% and assets under management in the sector. up 35% year-on-year to 6,07,449 yen at the end of May 2021.
“In fact, we’re expanding the universe of investing, whether it’s debt or stocks, and some areas that we didn’t allow pension fund managers to invest in earlier. “Said Supratim Bandyopadhyay, president of PFRDA.
While the cap on overall investment in stocks and related investments remains unchanged at 15%, pension funds can now invest in IPOs, Follow-up Public Offers (FPOs) and Sell Offers (OFS). ‘companies.
Pension funds can also invest in stocks of companies listed on the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), which are the top 200 stocks in terms of total market capitalization on the date of investment.
Until now, pension funds could invest in shares of companies listed on the BSE or NSE, which have a market capitalization of at least 5,000 crore on the date of investment.
Higher free height
In view of the increase in public borrowing, pension funds were allowed to invest up to 55% of their corpus in the category “government securities (G-Sec) and related investments” compared to the limit of. 50% within the 2015 guidelines.
In the aforementioned category, the PFRDA clarified that deposits with a listed commercial bank, including its subsidiaries, should not exceed 10 percent of the regime’s portfolio. This is an important decision in the context of past problems at Yes Bank and Lakshmi Vilas Bank.
The funds can now invest in AAA rated debt securities issued by real estate investment trusts and infrastructure investment trusts.
They may also invest in municipal bonds listed or offered for AAA rating and debt ETF units issued by the Indian government specifically intended to invest in bonds issued by public entities.
The investment limit for “debt instruments and related investments” is unchanged up to 45%, while that for “short-term debt instruments and related investments” has been set at a maximum of 10% (up to ‘at 5% according to 2015 guidelines). In the category “asset-backed, trust-structured and miscellaneous investments, the investment limit remains unchanged up to 5%.
Once these guidelines come into effect, the prescribed investment model will be carried out separately for each successive fiscal year through timely and appropriate planning, the authority said.
The PFRDA has called on pension funds to be cautious to ensure that the same investments are not turned into churning to increase fees payable. In this regard, fees for investments in the category “short-term debt instruments and related investments” should be carefully billed, in particular.