Here’s how to choose a fund manager for your National Pension System investment

The National Pension System (NPS) is a voluntary contributory pension system which aims to provide retirement income in retirement through market-linked returns. Any Indian citizen between the ages of 18 and 65 can open an NPS account. Non-resident Indians (NRIs) can also open an NPS account.

The pension scheme now manages over Rs 7.73 lakh crore as pension assets of government and private sector employees.

According to tax and investment experts, one should choose a fund manager carefully while investing in the NPS.

Amar Ranu, Head of Investment Products and Advisory at Anand Rathi Shares and Stock Brokers, explains Amar Ranu: “Although NPS is a low-cost retirement product, choosing the right fund manager is the most important task. However, unlike mutual funds (MFs), NPS information is available in a very limited capacity in the public domain, and no one provider collects the data holistically. NPS managers.

Previously, there were seven NPS managers; however, four more have been added recently, bringing the total number of fund managers to 11. Thus, the task becomes even more daunting for retail investors to select the right fund manager. The four asset managers who recently received certification for NPS asset management are: Axis Asset Management, DSP Investment Managers, Tata Pension Funds and Max Life Pensions.

Ranu adds, “Seeing historical performance, more or less, all fund managers have identical performance differing a few basis points up or down except LIC Pension Fund which is underperforming. widely. However, among the pack, HDFC Pension Fund is the top performer based on a three- and five-year track record. Not all pension managers have bitten the index indicator, Nifty 50 SORTING.

Moreover, these fund managers were mostly managing their portfolios passively, largely replicating indices and sticking to large caps, thus playing it safe. However, they have now started adding mid caps and are actively managing them, which can result in additional alpha over benchmarks, as we have seen with mutual funds. However, according to experts, one should not just look at performance when selecting the fund manager. The risk taken to obtain the return must also be taken into account – the standard deviation is the right tool.

So here’s how you can choose the right fund manager for your NPS investment.

1]First, choose between automatic and active fund management modes. If you have chosen an equity exposure above 50%, it is advisable to choose the active mode instead of the automatic mode.

2]Next, choose the fund manager. You can view fund performance to date to understand how funds managed by a particular fund manager have performed over time. If your exposure to debt is high, check the performance of the debt funds managed by the fund manager. Similarly, if your equity exposure is greater, check the performance of equity funds managed by the fund manager.

Adhil Shetty, CEO and Founder of BankBazaar.com, a financial services website, says, “Keep reviewing your selected fund manager’s performance after you start investing. If you are not convinced that the return it has given is equal to that of other similar funds, you have the option of changing the fund manager once a year.

3]Rolling returns will only give you an idea of ​​how the fund is performing. You should review it from time to time to ensure that the performance is comparable to that of other funds in the same category.

Ranu adds, “The consistency of rolling returns over three- and five-year periods is the best tool for deciding on the risk taken. However, switching fund managers based on short-term performance should be avoided. On the contrary, you have to see the performance of the fund over a longer horizon.

4]Evaluate the performance of your fund manager. If you are not satisfied with the performance it has given, change the fund manager. NPS subscribers are allowed to change fund manager once a year.

5]Finally, as Ranu suggests, it would be best to see the portfolio and positioning before selecting the fund manager. However, the availability of wallet data is limited.

“With the increase in the number of fund managers, there is going to be tough competition among fund managers to offer the best, which is good for all stakeholders, including investors,” Ranu adds.

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