India’s capital market regulator Securities and Exchange Board of India (Sebi) has asked the government to allow pension funds to invest money in mutual funds (MFs).
The move will not only make huge amount of funds available for long-term investments in the market, but also help reduce the country’s reliance on investments made by foreign institutional investors (FIIs) to an extent.
“Sebi is of the view that the money from the pension funds should be allowed to come to the market (via MFs). Now, whether the government can take a decision on that needs to be seen,” UK Sinha, chairman, Sebi, said during the Confederation of Indian Industry Mutual Fund Summit.
Sebi has already recommended that surplus money of all public sector undertakings should be allowed to be invested in MFs. According to prevailing rules, only navratna and miniratna PSUs can invest in MFs owned by public sector companies. Sinha said that since the industry was being well regulated by Sebi, there was no reason why this could not be expanded to allow other PSUs and pension funds to flow into MFs as well.
“The PMS (portfolio management services) industry has a size of ` 7.70 lakh crore. Out of that, about ` 6.50 lakh crore is from the pension industry and of that about ` 5.50 lakh crore has come from one investor — EPF (employee provident fund). They are investing but why are they not coming to asset management companies?” Sinha questioned.
A CII-Ernst & Young report released in December 2013 projected that the investment corpus in the Indian pension sector is expected top $1 trillion by 2025.