Pension Fund Regulatory and Development Authority (PFRDA) chairman Hemant Contractor said about 19 per cent of the National Pension System’s corpus has been invested in the infrastructure sector and this exposure is likely to increase.
“Infrastructure creation needs a stable rate for financing and the assets are usually illiquid. This suits pension funds which have 25 year to 40 year time horizons for their liabilities and are not too unhappy with illiquid assets as they are usually ‘buy and hold’ investors with a steady flow of contributions from members,” Mr. Contractor said. The National Pension System (NPS), which was introduced in 2004 for new government employees, is now open to private citizens and corporates as well, and has 1.2 crore subscribers with annual inflows of about Rs.35,000 crore.
“We have made it easier for pension funds to invest in infrastructure by opening up for infrastructure debt funds, investment trusts and real estate investment trusts. The result is infrastructure exposure of pension funds is steadily rising,” the PFRDA chief said. He, however, ruled out direct investments into infrastructure projects unless there are listed debt or equity instruments associated with them. “There are some misconceptions about pension funds. We don’t put money in unlisted instruments as a rule. In fact, globally, by and large, such funds only invest in listed securities,” Mr. Contractor said.
