India is considering reforms to its approximately $180bn National Pension System (NPS) that would allow pension fund managers to increase allocations to private markets, alternative assets and lower-rated corporate debt, according to Private Equity Wire. The potential changes were reported by Bloomberg, according to Private Equity Wire.
Committee review under India’s pensions regulator
A committee established by the Pension Fund Regulatory and Development Authority is reportedly reviewing existing investment restrictions, according to Private Equity Wire. Proposals under review include creating a dedicated allocation category for alternative assets, according to the report.
The proposals also include permission for pension fund managers to invest in unlisted equities, according to Private Equity Wire.
Proposed allocation changes and eligible assets
The reforms under consideration would allow pension fund managers to increase allocations to private markets, alternative assets and lower-rated corporate debt, according to the report cited by Private Equity Wire. The reforms could allow pension funds to diversify beyond highly rated bonds and large-cap listed equities, according to Private Equity Wire.
Other proposals would reportedly expand the eligible listed equity universe from 250 to as many as 500 companies by market capitalisation, according to Private Equity Wire.
Benchmarks, risk management, and approval status
The committee is reportedly also considering standardised performance benchmarks, according to the report cited by Private Equity Wire. The committee is reportedly considering revised risk management requirements as part of its review, according to Private Equity Wire.
Its recommendations remain subject to regulatory approval, according to Private Equity Wire.
Implications for alternative asset managers
The reforms could significantly expand the pool of domestic institutional capital available to private equity and private credit managers, according to Private Equity Wire. The potential changes could open new opportunities for domestic and international alternative asset managers seeking access to India’s growing retirement savings market, according to Private Equity Wire.
Private equity and private credit are commonly grouped within “private markets” in industry usage, as distinct from public equities and publicly traded bonds.
