PFRDA is wary of pension fund investment in startups – Times of India

MUMBAI/DELHI: The Pension Fund Regulatory and Development Authority (PFRDA) is unlikely to rush into allowing fund managers to invest in startups, a top official said on Tuesday.
The authority had recently permitted fund managers to participate in initial public offerings (IPOs) of companies with minimum issue size of Rs 500 crore. Additionally, the post-IPO valuation should place them among the top 200 listed companies.
“The biggest challenge for us is that we need daily NAV (net asset value) on all investments, like mutual funds, and that may not be possible with startups. Besides, there are challenges related to valuation,” said PFRDA chairman Supratim Bandyopadhyay in a media briefing.
On Monday, the government had suggested that LIC and the Employees’ Provident Fund Organisation may invest in startups, a plan for which a section of EPFO is not fully on board.
While the PFRDA chief did not rule out the possibility, he suggested caution.
The relaxation on IPOs comes at a time when the market is flush with offerings and the National Pension Scheme (NPS) has recorded a milestone of 30 lakh non-government retail accounts with Rs 97,000 crore assets under management.
Including the government accounts, the PFRDA has assets under management of Rs 6.4 lakh crore — an increase of 31% over Rs 4.9 lakh crore last year.
Bandyopadhyay said that the regulator would not go into the valuation of companies going for IPO and investing would be entirely the call of the fund managers. He said that the current headroom for investment under the qualified institutional bidders is enough as only 14% of government employees’ corpus is invested in equities.
The pension regulator said that in the last 12 years, the equity investment of the PFRDA has generated a compounded annual growth rate of 12.9% as against 9.9% for corporate bonds and 9.4% for government securities. However, the return on full-life annuities by life insurance companies range between 5.25% and 6% and are subject to change. Bandyopadhyay said that the insurance regulator is in discussions to allow inflation-linked annuity products and this would make pensions more attractive.
The PFRDA has floated a request for proposals from consultants to help design a minimum assured return scheme under NPS. The regulator has decided to extend the last date as bidders have said that it was difficult to meet the condition requiring experience in designing similar products for India.The PFRDA is also in talks to increase the points of presence (PoPs) that are entitled to distribute the NPS products. “We now have fintechs like Banyan Tree, ETMoney, Paytm and Zerodha who can provide an end-to-end digital channel for pension. For the semi-urban customers, we are allowing individuals to be registered as PoPs under existing PoPs as last-mile connectivity is very important,” said Bandyopadhyay. ETMoney is part of the Times Group.