Now pension fund managers will have more investment options to explore.
PFRDA has allowed pension fund managers to invest up to 5% of NPS corpus in Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs).
REITs invest in rent yielding commercial and residential properties to generate regular income while InvITs invest in infrastructure projects to generate income by the way of tolls.
Both REITs and InvITS would come under newly formed category called ‘Alternative Asset Class’ or ‘A’ which invest in alternative investment funds (AIFs). There were five asset classesunder NPS – gilt, fixed income, equity, AIFs and liquid (temporary basis).
PFRDA clarified that the fund managers can invest REITs and InvITs only if they have a minimum rating of AA or its equivalent from at least two recognised credit rating agencies.
IRB Infrastructure is the first company in the country to launch InvITs. A number of firms including Reliance Infrastructure and India Grid Trust have filed draft offer document with SEBI to launch InvITs. A few more players like Sterlite Power Transmission, IL&FS Transportation Network and MEP Infrastructure development are in a process to file draft offer document with SEBI to launch InvITs.
REITs are yet to be launched in India. Media reports say that Blackstone Group in collaboration with the Embassy Group of Bangalore would launch its REIT soon.
Apart from REITs and InvITs, pension fund managers can invest in AIF category I and AIF category II. While, the AIFs in category I invest in SME funds, venture capital funds, infrastructure funds and social venture capital funds, AIFs in category II invest in private equity or debt funds.
PFRDA has also cautioned pension fund managers to assess risks related to liquidity before taking exposure to such instruments.
The revised investment guidelines for NPS come into effect immediately.
