PFRDA's new policy to allow pension funds to invest in IPOs, FPOs and many other listed companies

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PFRDA Chairman Supratim Bandyopadhyay says, comprehensive changes have been made to PFRDA's investment policy and provident fund managers will be allowed to invest in top 200 companies as per M-Cap on both BSE and NSE

PFRDA's new policy to allow pension funds to invest in IPOs, FPOs and many other listed companies
Pension Fund Regulatory and Development Authority (PFRDA) is expected to release a revised investment policy soon. The new policy will entail some crucial changes and is expected to be notified in the next couple of days.
PFRDA Chairman Supratim Bandyopadhyay in an interview to CNBC-TV18, said that some comprehensive changes have been made to PFRDA's investment policy. Speaking in detail about these changes, Bandyopadhyay said that provident fund managers will now be allowed to invest in top 200 companies as per market capitalisation on both BSE and NSE. Currently, provident fund managers are only allowed to invest in listed companies which have a market capitalisation of Rs 5,000 crore and above.
That's not the only change to the investment policy, Bandyopadhyay added that provident fund managers will also be allowed to invest in IPOs, FPOs and OFS issues of various companies. Additionally, provident fund managers will be permitted to invest in debt instruments of REITs and InvITs.
The changes to the investment policy of provident fund managers will be effective from the day it is issued.
Bandyopadhyay highlighted that the changes to the investment policy for provident fund managers have been made after considering their requirements.
Speaking about Pension Funds' investment into the infrastructure sector, PFRDA chairman said that the government has sought a report and explained that close to 50 percent of the corporate bond fund and 17-18 percent of the total portfolio is invested in infrastructure sector.
When asked if he would be comfortable in Provident Fund's money being invested into IPOs of loss making new age companies, Bandopadhyay said that pension funds investment in IPOs will be subject to certain guidelines. According to him, pension fund managers will have to look into the valuations, fundamentals, quality of anchor investors and many other aspects before investing into any IPO.
Since pension, retirement fund is the only source of money post retirement for an individual, Bandopadhyay said safety of investment will be the central focus for fund managers under the new investment policy.
Bandopadhyay continued that the government has fixed a cap of 15 percent on what can be invested in equity out of the total investible corpus, but subscribers can voluntarily increase their individual PF investment into equity market to 50 percent.
However, according to Bandopadhyay, very few Provident Fund subscribers have increased their equity investment beyond 15 percent. On being asked if the limit itself for minimum equity investment should be increased for all Provident Fund subscribers, PFRDA Chairman said that the pension body is in talks with the government on increasing minimum equity investment and default funds could see that change coming in terms of increasing the minimum equity investment to 20 percent from current 15 percent.
PFRDA has also permitted on-tap licenses for selecting pension fund managers. Bandopadhyay stated that they already have received one application and expect to receive another one before the deadline ends on July 30.
Speaking on Pension Funds' performance, Bandopadhyay said that in FY21, the total Assets Under Management (AUM) grew by over 38 percent to Rs 5.78 lakh crore from Rs 4.17 lakh crore. In FY22, up to the period till July, AUM grew by 32 percent on a year on year basis.