Pension money will soon be allowed in IPOs, NSE-200 companies: PFRDA

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MUMBAI: Pension fund managers (PFMs) will soon be allowed to invest in initial public offerings, as well as a broader list of stocks, a senior official at sector regulator PFRDA said on Tuesday.
The Pension Regulatory and Development Authority (PFRDA) aims to increase the number of subscribers seeking to build a pension corpus of 1 crore in FY 22 with increasing interest during the pandemic, its chairman said Supratim Bandyopadhyay to reporters.
Currently, there are restrictions under which PFMs can invest the equity component of a corpus only in scripts traded on the options and futures segment with a market capitalization of over Rs 5,000 crore.
Officials said this limited opportunities for fund managers, who have been able to generate a compound annual growth rate of 11.31% on equity investments since the start of the new pension scheme. They cited Avenue supermarkets as an example, where PFMs were unable to enter due to restrictions.
“In two or three days, we will notify new rules that take a more liberal view of the categories in which equity investments can be made,” Bandyopadhyay said.
Under the new rules, GFPs will be able to invest in IPOs, follow-up public offers, offers to sell companies. And, the universe of stocks to choose from will also be broadened to include the first 200 scripts traded on NSE and BSE, he said.
Bandyopadhyay stressed that he was personally for more investment in stocks because of the returns he generated.
Certain specifications will be introduced to reduce the risk associated with equity investments, he said.
Responding to questions regarding the upcoming listing plans for new age companies and the possibility of retirement money being invested in a company that has yet to generate profits, he said the PFRDA is of the opinion of give independence to PFMs in their choice.
Currently, equity investments have generated returns of 11.31 percent, corporate debt has generated 10.21 percent, and government securities 9.69 percent. The total number of NPS subscribers currently stands at 4.37 crore, with a maximum of 2.90 crore falling under the Atal Yojana pension.
“We aim to increase the subscriber base by 1 crore in FY 22, which will include 90 lakh for APY and the rest for other products,” Bandyopadhyay said, adding that despite the impact of the second wave, it added 1.60 lakh of subscribers in the first quarter. .
There has been a shift in strategy when it comes to investing in the debt market, where PFMs opt for intermediate maturity profiles of less than 10 years as there is no chance that yields will fall further, did he declare.
With the hands free, the 10-year benchmark government security will harden to 6.25 to 6.50 percent, he said.
The PFRDA should also allow PFMs to invest in debt securities issued by real estate investment trusts and infrastructure investment trusts, he said.
Bandyopadhyay added that the budget’s announcement to include these securities in a bad debt resolution case gives PFRDA greater confidence to authorize such a move.
Meanwhile, the PFRDA has also decided to allow withdrawals up to three times during the execution of a subscription to help an investor address immediate liquidity issues, Bandyopadhyay said, adding that such withdrawals would be capped at 25%.
He admitted, however, that premature withdrawals do not help an investor and can also undermine the purpose of investing.
Speaking of upcoming legislative changes, especially those that will be made through statute amendments during the current monsoon session of parliament, he said there was a need for pension funds to be regulated. by the PFRDA.
It will also help investors through better tax treatment, Bandyopadhyay said.
The NPS program, which has seven PFMs, has opened a commissioning window for new managers, Bandyopadhyay said, adding that he expects at least two entities already managing more than 50,000 crore of corpus. are presented.
In addition, the request already received from Axis Mutual Fund is also ongoing and its parent company, Axis Bank, must get the go-ahead from the RBI before it becomes operational, Bandyopadhyay said.
He also praised the government allowing 74 percent of foreign direct investment in PFMs.
Bandyopadhyay said Rs 425 crore was invested by 85,000 subscribers through the D-remit facility, which allows immediate capture of net asset values.


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