Nine companies bid for National Pension System fund manager

On 17 September, PFRDA had invited fresh bids for managing funds of the private sector National Pension System


Currently the private sector NPS has eight pension fund managers. Photo: Pradeep Gaur/Mint
Currently the private sector NPS has eight pension fund managers. Photo: Pradeep Gaur/Mint

New Delhi: Nine companies have bid for the mandate to become pension fund managers under the private sector National Pension System—one short of the 10 the sector regulator wanted to select, said people familiar with the development.

The Pension Fund Regulatory and Development Authority (PFRDA) selects the fund managers based on the cost they quote to manage the NPS.

On 17 September, PFRDA invited fresh bids for managing funds of the private sector NPS and 17th October was the last date for submission of proposals. Senior officials of existing pension fund management companies said on condition of anonymity that only nine companies had applied.

PFRDA officials declined to comment.

Currently the private sector NPS has eight pension fund managers namely HDFC Pension Management Co. Ltd, ICICI Prudential Pension Fund Management Co. Ltd, Kotak Mahindra Pension Fund Ltd, LIC Pension Fund Ltd, Reliance Capital Pension Fund Ltd, SBI Pension Funds Pvt. Ltd, UTI Retirement Solutions Ltd and Birla Sun Life Pension Management Ltd. Birla Sun Life has not yet begun its business. All of these companies have bid for the PFM licence again, according to the officials

Mint spoke to.

The ninth is DSP BlackRock Investment Managers Pvt. Ltd. If selected, this will not be the first time the company will manage pension funds of the NPS. It got its licence as a pension fund manager in 2012 when PFRDA did away with the auction process and allowed eligible companies to set up pension fund management houses. At that time the regulator capped the fund management fee at 0.25%. But two years later in 2014, PFRDA decided to reintroduce the auction process and called for fresh bids. The lowest pension fund management cost was fixed at 0.01% and judging the fee to be low DSP Blackrock pulled out of the race.

“We have seen a lot of growth oriented thinking at the PFRDA. We see this trend continuing and want to be part of it. NPS is a good product that should touch the lives of many people in the country. Since we are a prominent company in the financial sector, it makes sense to be in the space, though it may not be remunerative,” said Hemendra Kothari, non-executive chairman, DSP BlackRock Investment Managers Pvt. Ltd.

What has also changed since the last auction is the structure of auction. This time, instead of racing to the bottom, PFRDA has capped the fund management fee to 0.1% or 10 basis points. So PFMs can bid within this cap. Bidders will be ranked based on their fund management cost bids and the ones that make it to the bottom 10 will be considered as PFMs. These PFMs will be allowed to operate at the bid price. So unlike the current system where the fund management cost is a flat 0.01% across all the seven PFMs, the new PFMs will charge a different fund management fee up to a maximum of 0.1%.

The financial bid opening—in which the companies will bid on the basis of fund management cost—which was originally scheduled for 7 November has been postponed till 30 November and the final number of bidders will be confirmed only then.

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