Company benefiting from growing awareness about NPS:
SBI Pension Fund is one of the leading companies in the industry. It handles pension fund management across the spectrum viz. corporate pensions & bank pensions, government pension and Atal Pension Yojana. Anthony Rodrigues, Managing Director & CEO, updates about the business growth in the current FY. He claims: “We are the largest pension fund manager with AUM of Rs2.65 trillion as on November 2021. We enjoy highest market share of more than 38% in the overall sector, while we remain market leader in both government and private sectors. For the period ended November 2021, our company witnessed AUM growth of 29.3% y/y, marginally higher than the industry growth. Our growth is a function of both marketing strategy and better investment performance, with larger emphasis on investment performance.”
Risk Adjusted Returns
Current FY has been a great year for equities as an asset class, which has been driving force for the higher returns reported by overall National Pension System (NPS) including SBI Pension Fund. Anthony explains: “As a fund manager we have always believed in generating high risk adjusted returns for our subscribers. We continue to work on the same philosophy while strengthening our existing processes and risk management policies to deliver strong performance on sustainable basis. In FY22 (YTD), we have generated returns between 6.2% and 6.4% in our hybrid schemes, which allows up to 15% exposure to equity as an asset class. Fixed income-oriented schemes generated returns of 4.5-5% and equity-oriented schemes have generated return of 16% in line with the Nifty returns. We work closely with CPSEs to transfer some of their existing superannuation funds under the NPS ambit, largely due to alpha that we have been able to generate over the returns reported by superannuation funds on a long-term basis.”
There are certain major changes in the saving, investment trends and patterns of the customers during the last 2 years, especially in view of covid restrictions. Some customer segments are shifting savings from traditional products like FDs, small saving schemes including NSC to investing in pensions, MFs, equities, corporate FDs, IPOs, NCDs, commodities, etc. There has been growing awareness of the NPS as a product. Subscribers are now looking at NPS as more of a retirement product as compared to tax benefit product a few years back.
Anthony points out: “The pandemic has made us realize that there is a growing need for financial security especially for the unorganised sector. People require schemes, which offer good return and allow them to dip into the savings in situations like pandemic which lead to loss of income. We believe as a bouquet of product we complement with each other. Some of the products take care of short-term needs while we are truly long-term product offering benefits of compounding to our subscribers for financial security post retirement. Though I would like to mention one important analysis presented by CRISIL for us, which suggests that we have outperformed all forms of investment tools including mutual funds in the long term.”
In the current NPS architecture, all the data related to subscribers are maintained by the Central Record keeping agency (CRA). Anthony informs: “SBI Pension Fund operates under a unique model, which has been developed by the Regulator and NPS Trust. There are two CRAs NSDL and Kfintech to maintain subscribers related data on behalf of the NPS Trust. The data related to subscribers and the composition of the subscribers is not shared with the PFMs.”
SBI Pension Fund is at the inflexion point with the revision in the incentive structure for the PFMs in the current FY. Anthony underlines: “The change in fee structure has improved our financial flexibility to invest in people and further strengthen our infrastructure. We plan to increase our investment team and Point of Presence (POP) team keeping in view our growing AUM and huge untapped market. We expect our AUM to grow around 30% y/y in the current FY. To achieve this target, we will have to deliver strong performance. We expect the market to witness volatility in the last quarter which may have a bearing on our returns though we will continue to outperform other investment products and key benchmarks.
Currently, products for the industry are developed by the regulator, PFRDA, though SBI Pension Fund always believes that creating new products by the Pension Fund Manager (PFM) will be next big thing for the industry. Anthony reveals: “We want to use our recently acquired POP licence for better engagement with our subscribers. We want to make onboarding on the NPS platform seamless both for our corporate as well as retail subscribers.”