NPS Revamp: Gold, Silver ETFs, IPOs, REITs Now In The Mix

The National Pension System (NPS) has been revamped, with investing options like initial public offerings, real estate investment trusts, infrastructure investment trusts, and gold and silver exchange-traded funds added to the mix, according to a circular released by the Pension Fund Regulatory and Development Authority on Wednesday.

As things stand, the pension funds are to allocate the majority of the assets into government securities, corporate bonds and other regulated entities.

Here's a look at some of the other regulated investment options added to the mix:

As per the new guidelines, pension funds can invest in AIFs whose corpus is equal to or more than Rs 100 crore. The exposure to a single AIF is to not exceed 10% of the AIF size, as per the circular.

The pension funds can now also invest in gold and silver ETF regulated by SEBI, along with REITs, InvITs and municipal bonds. It is also directed that the units of REITs, equity-oriented AIFs, and gold, silver ETF is capped at 5% of the assets under management of the scheme or the asset class itself.

When it comes to investing in REITs, the trust should have minimum rating of ‘AA’ or equivalent rating in the rating scale from at least two credit rating agencies registered by SEBI.

Pension funds can also invest in IPOs, follow-on-public offer, and offer-for-sale of companies approved by SEBI, provided that they meet certain criteria.

PFRDA guidelines for investing in the above that are the IPO should be a mainboard IPO. The full float market capitalisation calculated at lower band of IPO issue price should be equivalent or greater than the m-cap of the 250th company on the NIFTY 250 Index list.

Additionally, PFs are now allowed to invest in shares through secondary market under certain outlined conditions. The circular also flags that PFs should ensure to not be invested in securities of companies or funds incorporated and operated outside the India.