Some NPS fund managers are just better than others

Difference between the best and the worst pension equity fund is as much as 4.92%. The decision by the Pension Fund Regulatory and Development Authority (PFRDA) to give fund managers a free hand has started showing results. For example, the Tier-1 equity plans from Kotak Pension Fund has generated a return of 14.45 per cent during the last one year, compared with the Nifty50’s return of 10.97 per cent, an outperformance of 3.48 per cent.

However, some fund managers like ICICI Prudential Pension Fund has also underperformed during this time and could generate a return of only 9.53 per cent. And this diverging performance means the difference between best and worst performing equity fund is a whopping 4.92 per cent (see Table for more details).

Similar divergence is visible in government bond plans as well and the difference between best performer (ie LIC Pension fund with 10 per cent returns) and worst performer (ie UTI Retirement Solutions with 7.25 per cent returns) is 2.75 per cent.

This is clearly bad news for investors who bet on under performing fund managers.

So, what should they do now?
There is not much NPS investors can do now because they are not allowed to have equity and debt from different fund managers. That means they have to wait till PFRDA allow them to invest in equity from one fund manager and debt from another fund manager.

Should investors shift to the new fund manager altogether?
No need, say experts. “Since one year is short time period to judge equity performances, we need to wait for their historical returns to settle down”, says Anil Lobo, India Business Leader ­ Retirement, Mercer. The diverging performance in equity and government bond plan is another reason.

For example, while Kotak Pension Fund is the best performer on equity side, its performance is not that great in debt side. Similarly, LIC Pension Fund, the best performer in debt, is not doing great in equities.

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