Pvt sector NPS subscribers can invest in AIFs

In a move that could augment flow of funds to the nascent alternative investment funds (AIFs) industry, the pension Fund Regulatory and Development Authority (PFRDA) has allowed private sector subscribers under the National Pension System(NPS) to invest up to 2% of their corpus in the tax efficient AIFs , its chairman Hemant G Contractor said.

The PFRDA-appointed G N Bajpai panel, which submitted its report in May 2015 on review of investment guidelines,had suggested that pension fund managers be given policy flexibility to invest in instrument like Real Estate Investment Trusts (REIT), AIFs and investment trusts within a cap of 5% of corpus for such instruments.

PFRDA has also written to the government to allow government sector subscribers , which constitute nearly 90% of the NPS corpus of Rs.1.1 lakh crore, also to invest in AIFs.

AIFs refers to private equity and hedge funds. In the previous Budget , the AIFs were given pass through status under Income Tax Act. AIFs provide another vehicle for facilitating domestic instruments, primarily in unlisted securities.

On other recommendations of the Bajpai panel, such as the one to give the option of up to 50% (up from 15%) equity exposure to government employees under the NPS. Contractor said the government will take a call on it.The panel had said that higher equity play and investment in hybrid instruments could help subscribers earn higher returns like their private sector peers . Private sector subscribers are permitted to invest up to 50% in equity instruments.