Best performing NPS Funds – Top NPS Fund Managers / Best Returns in NPS : July 2020

National Pension System (NPS) was launched on 1st January, 2004 with the objective of providing retirement income to all the Indian citizens. It aims to introduce pension reforms and to instill the habit of saving in the citizens.

From 2004 to 2009, NPS was available for new government recruits (except armed forces) only. However from 1st May, 2009, all citizens including the unorganized sector workers can invest through NPS.

Overview of NPS

• Any individual citizen of India (both resident and Non-resident) in the age group of 18-65 years can join NPS. OCI/POI card holders and HUF aren’t allowed to invest
• Subscriber can contribute a certain sum each month from month of opting for NPS 
• Individual’s savings are pooled in selected pension fund. There are 3 funds choices currently and invest as per approved investment guidelines in the diversified portfolios comprising of government bonds, bills, corporate debentures, and shares.
• There are two accounts choices for investors,

Ø  Tier I Account – Under this account, withdrawals are not allowed till 60 years. Government employee are covered under this by default

Ø  Tier II Account – This works as a regular saving cum investment account and a subscriber is free to make withdrawals at any time. There is no tax benefits under this tier

At the time of a normal exit from NPS, the subscribers can withdraw only 60% of corpus. 40% has to be used to purchase a life annuity from a PFRDA empanelled life insurance company.

The NPS contribution & interest earned are eligible for deduction while withdrawals are taxable. We will cover the withdrawal taxation issue in separate article.

Read our detailed article on New Pension Scheme (NPS) here.

Investments

In NPS, subscribers can choose their own investment pattern. It also offers multiple investment options to choose from.

a) Active choice

Subscriber can actively decide as to how his NPS contribution is to be invested in the following four options: 

Asset Class E - Investments in predominantly equity market instruments.            

Asset Class C - investments in fixed income instruments other than Government securities.         

Asset Class G - investments in Government securities.

Asset class A: Investment in Alternative Investment Schemes including instrument like CMBS, MBS, REITS, AIFs, InvIts etc.  

Subscriber can choose to invest his/her entire pension wealth in C or G asset classes and up to a maximum of 75% in equity (Asset class E) and upto a maximum of 5% in asset class “A”.

  b) Auto Choice

In case subscriber doesn’t chose any option as mentioned above, money would be invested thru this option. In which where money will get invested in various types of schemes as per subscriber’s age. The funds available are,

(i) LC75 – Aggressive Life Cycle Fund: In this Life Cycle Fund, the exposure in Equity Investments starts with 75% till age 35 and gradually reduces as per the age of the subscriber.

(ii) LC50- Moderate Life Cycle Fund: In this Life Cycle Fund, the exposure in Equity Investments starts with 50% till age 35 and gradually reduces as per the age of the subscriber.

(iii) LC 25- Conservative life cycle fund: In this Life Cycle Fund, the exposure in Equity Investments starts with 25% till age 35 and gradually reduces as per the age of the subscriber.

Now let’s see details of Funds Performance in carious NPS Funds

Please note the performance is up to July 2020. 

Fund Performance in TIER I

Equity Plan Asset Class E

Fund	Duration
	1-Year	3-Year	5-Year
TIER I: Equity Plans
SBI Pension Fund	-1.03%	2.72%	5.76%
LIC Pension Fund	-2.50%	1.02%	4.21%
UTI Retirement Solutions	-1.29%	2.45%	5.74%
ICICI Pru Pension Fund	-0.43%	2.56%	5.42%
Kotak Pension Fund	1.68%	3.19%	6.14%
HDFC Pension Fund	1.74%	3.81%	6.83%
Birla Sun Life Pension	4.39%	4.67%	NA

As can be seen above, over a period of 5 years there is not much difference in any funds. However the difference is sharp for those who have invested last year.

As can be seen, Birla Pension Fund is clear winner with 4.39% return as compared to LIC Pension who have given negative 2.5% return. That is clear lead of over 6%. In last one year Birla is emerged as clear winner in equity asset class in a time which was tough for stock markets / equities.  

Even for a period of 3 years, Birla Pension Fund clearly emerges as winner leaving behind other Fund houses.

SBI Pension Fund which has given -1.03% return for last one year manages highest AUM at 3663  Crores. Birla Pension Fund on other hand manages lowest Fund at 79 Crores.

Government Bond Plan Asset Class G

Fund	Duration
	1-Year	3-Year	5-Year
TIER I: Government Bond Plans
SBI Pension Fund	12.43%	10.15%	10.96%
LIC Pension Fund	12.01%	11.06%	11.87%
UTI Retirement Solutions	12.34%	9.70%	10.45%
ICICI Pru Pension Fund	11.64%	9.97%	10.77%
Kotak Pension Fund	12.14%	9.91%	10.97%
HDFC Pension Fund	12.79%	10.31%	10.94%
Birla Sun Life Pension	12.15%	9.69%	NA

Last few years have been good for investors in Govt bonds as these Funds have given returns that have beaten even equity mutual funds returns.

As can be seen, there is tough fight for number one spot and HDFC Pension Fund emerges as top fund by a small margin in all categories, 1 Year, 3 Years and 5 Years. In one year category, SBI Pension Fund comes close second at 12.43% followed by UTI Pension Fund at 12.34%

In this category also SBI Fund Manager have highest AUM at Rs 4854 Crores followed by HDFC Pension Fund whose AUM stands at Rs 3778 Crores

Corporate Debt Plan Asset Class C

Fund	Duration
	1-Year	3-Year	5-Year
TIER I: Corporate Debt Plans
SBI Pension Fund	12.41%	9.20%	10.07%
LIC Pension Fund	12.43%	8.99%	9.94%
UTI Retirement Solutions	12.26%	8.79%	9.82%
ICICI Pru Pension Fund	11.37%	9.08%	10.07%
Kotak Pension Fund	9.72%	8.06%	9.53%
HDFC Pension Fund	12.79%	9.37%	10.24%
Birla Sun Life Pension	13.13%	10.64%	NA

Usually, there is no stark out-performance or under-performer in Debt category given the very nature of investments. However in last one year gap between leading Fund and bottom Fund has widened. The gap is almost 25%+ in performance which is unusual.  

Birla Pension Fund is a clear winner for 1 year and 3 Years durations in Corporate Debt Class. In last one year Birla Pension Plan has given returns of 13.13% which are almost 2.5% more than Kotak Pension Fund which is laggard in this category. Even for 3 years duration Birla Pension leads with 10.64% return as compared to Kotak Pension Fund which has delivered returns of 8.06%.

As far as AUM is concerned, Birla manages lowest AUM at 40 Crores compared to 2468 Crores for SBI Pension Fund. HDFC Pension Fund is close 2^nd in AUM at Rs 2340 Crores.

Fund Performance in TIER II

Note the NPS subscriptions figures are low as compared to other asset classes which show that pension culture / long term investments culture is yet to take off truly in India. None of the fund managers manages more than Rs 200 Crores in any of the plans.(in one asset class) and in many Funds the AUM is less than Rs 50 Crores.  

Equity Plans Asset Class E

Fund	Duration
	1-Year	3-Year	5-Year
TIER II: Equity Plans
SBI Pension Fund	-1.13%	2.72%	5.72%
LIC Pension Fund	-2.31%	0.91%	4.23%
UTI Retirement Solutions	-1.98%	2.50%	5.67%
ICICI Pru Pension Fund	-0.27%	2.72%	5.50%
Kotak Pension Fund	1.33%	3.12%	6.09%
HDFC Pension Fund	1.69%	3.12%	7.06%
Birla Sun Life Pension	4.47%	4.59%	NA

As can be seen Birla Pension Fund is clear winners in this asset class. Birla Pension Fund has given CAGR of 4.59% for last 3 years

SBI Pension Fund, LIC Pension Fund, UTI Retirement Solutions / Fund, and ICICI Pru Pension Fund, all have given negative returns for past one year reflecting challenging stock market condition owing to pandemic and resultant slowdown

One would be surprised to know asset under management under these funds. Birla Pension Fund manages just 8.1 Crores whereas HDFC Pension Fund leads here at Rs 165 Crores subscriptions. This shows there is long way to go for NPS in India.  

Government Bond Plan Asset Class G

Fund	Duration
	1-Year	3-Year	5-Year
TIER II: Government Bond Plans
SBI Pension Fund	12.35%	9.93%	10.79%
LIC Pension Fund	11.96%	11.76%	12.08%
UTI Retirement Solutions	11.99%	9.72%	10.59%
ICICI Pru Pension Fund	11.68%	9.89%	10.73%
Kotak Pension Fund	11.89%	9.41%	10.61%
HDFC Pension Fund	12.48%	10.10%	10.79%
Birla Sun Life Pension	11.76%	9.26%	NA

HDFC Pension Fund have beaten all other Pension Funds in last one year and has given return of 12.48%. Birla Pension Fund have given lowest returns for 1 and 3 years period. There is close fight between Birla Pension Fund and LIC Pension Fund for top spot across durations.

As far as AUM is concern,  SBI Pension Fund leads at 171 Crores which is marginally higher than that of HDFC Pension Fund at Rs 153 Crores.

Corporate Debt Plan Asset Class C

Fund	Duration
	1-Year	3-Year	5-Year
TIER II: Corporate Debt Plans
SBI Pension Fund	12.20%	8.92%	9.84%
LIC Pension Fund	11.65%	8.44%	9.63%
UTI Retirement Solutions	12.03%	8.89%	9.76%
ICICI Pru Pension Fund	11.58%	8.90%	9.93%
Kotak Pension Fund	12.04%	8.79%	9.89%
HDFC Pension Fund	13.14%	9.43%	10.25%
Birla Sun Life Pension	12.21%	9.73%	NA

HDFC Pension Fund have given category best returns of 13.14% in 1 Year category and its closely followed by Birla Pension Fund and SBI Pension Fund.

In 3 Years category, Birla leads again with a narrow margin at 9.73% followed by HDFC Pension Fund at 9.43%

In 5 years category, HDFC Pension Fund lead with a CAGR of 10.25% which is impressive and shows consistent performance

Table below shows AUM across Fund houses (in Crores)

Note in Tier I, we haven’t shared performance update for “Alternate Investment Class” as AUM is very less across Fund houses. This shows investors are yet to understand the concept of Alternate Investments. Investment in Alternative Investment Schemes includes instrument like CMBS, MBS, REITS, AIFs, InvIts etc. In Pension Fund like UTI Pension Fund, AUM stands at mere Rs 2.2 Crores, even for LIC Pension Fund its 2.7 Crores only.