• India's pension regulator, PFRDA, has updated its norms to allow pension funds to invest in Category I and II alternative investment funds (AIFs), including private equity and venture capital, as well as gold and silver ETFs. This directive revises previous allowances made nearly a decade ago.
• Despite the potential to access approximately Rs 72,000 crore ($8 billion) from the National Pension Scheme (NPS) corpus, pension funds currently have no investments in AIFs. The NPS corpus has grown significantly, reaching Rs 14.4 lakh crore in FY25, with a young subscriber base.
• Operational challenges hinder pension fund investment in AIFs, including a mismatch between the daily Net Asset Value (NAV) declaration required by NPS and the less frequent valuation mandates for AIFs. Additionally, the closed-ended nature of AIFs with long lock-in periods conflicts with NPS subscribers' ability to change allocations multiple times a year.
• Limited awareness and transparency regarding AIFs are also cited as barriers to investment. Suggestions to improve participation include exempting alternative asset schemes from daily NAV declarations and offering AIFs as a passive investment option with allocation caps.

Asha Menon

​The Indian pension regulator’s latest directives allowing pension funds to diversify their investment avenues may .........

Why pension funds still shy away from AIFs a decade after regulatory nod

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​The Indian pension regulator&rsquo;s latest directives allowing pension funds to diversify their investment avenues may make it easier for them to...

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National Pension System

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