BackDSP BlackRock, Tata Asset Management opt out of pension fund management race
PFRDA had asked the bidders to match the lowest fund management fee bid by 4pm on 15 July
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Two of the 10 bidders for the private sector pension fund management (PFM) business of the National Pension System (NPS) have opted out by not offering to match the lowest PFM fee bid of 0.01% (one basis point).
The Pension Fund Regulatory and Development Authority (PFRDA) had asked the bidders to match the lowest fund management fee bid by 4pm on 15 July.
Eight companies matched the bid. DSP BlackRock Pension Fund Managers Pvt. Ltd, which got its licence as a pension fund manager in 2012, and Tata Asset Management Co. Ltd, a new contestant, opted out.
PFRDA officials confirmed the names of the two candidates that had opted out. The officials didn’t want to be named.
In January, PFRDA decided to go back to the original design of selecting fund managers through bidding. In 2012, under then PFRDA chief Yogesh Agarwal, the authority had decided to do away with bidding and open the doors to many more pension fund managers, having selected six in 2009.
But by then IDFC Pension Fund Management Co. Ltd had already exited the business because of the extremely low fund management fee of 0.0009%. Not only were more fund managers invited, but the fund management charge was capped at 0.25%, giving some respite to the industry.
Three new PFMs—HDFC Pension Fund Management Co. Ltd, DSP BlackRock Pension Fund Managers and LIC Pension Fund Ltd—joined the fray, taking the tally of PFMs for the private sector to eight.
ICICI Prudential Pension Funds Management Co. Ltd, Kotak Mahindra Pension Fund Ltd, Reliance Capital Pension Fund Ltd, SBI Pension Funds Pvt. Ltd and UTI Retirement Solutions Ltd had been selected through the process of bidding in 2009. Birla Sun Life Insurance Co. Ltd and Tata Asset Management were the two new contestants.
In the current process of bidding, Reliance Pension Fund bid the lowest fund management fee of 0.01%, whereas UTI and DSP BlackRock bid the highest at 0.25%. The second lowest bid was at 0.15% by Kotak and Tata Asset Management.
A fee of 0.01% was again seen as unsustainable and is possibly the reason why an existing PFM and a new contender chose to opt out. In the request for proposal (RFP), PFRDA had stated that it would give licences to only eight pension fund managers. The licence will be given for a period of five years.
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