Pension AUM to hit Rs 118 lakh crore by 2030, NPS may capture 25% share: DSP Pension Fund

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India’s pension Asset Under Management (AUM) is poised to grow to Rs 118 lakh crore by 2030, and a significant 25 percent of this corpus is expected to go towards the National Pension Scheme (NPS), Rahul Bhagat, Chief Executive Officer at DSP Pension Fund Managers said on February 18.

The portion of private sector AUM that’s with NPS is expected to grow to Rs 9.12 lakh crore in the next five years with over 1.5 crore subscribers, said Bhagat.

DSP Pension Fund Manager’s CEO added that India's pension fund segment is significantly under-penetrated, representing only 3 percent of the country's GDP. On the contrary, countries like Australia, USA or Canada’s total pension funds stand at 146.2 percent, 98.3 percent, and 90.1 percent of their respective GDP.

By 2050, India's elderly population is expected to increase by 2.5 times, which could be a catalyst for the popularity of pension funds, Bhagat added.

DSP Pension Fund Managers’ Strategy

While most pension funds in India are passive, DSP has an active fund management, with the active share being 64.01 percent. The fund, launched last year, invests in equity shares of companies with low debt, significantly profitable businesses, and good corporate governance and competent management, said Ramneek Kundra, Chief Investment Officer at DSP Pension Fund Managers.

Kundra said he has a conservative approach while assessing companies through a risk-reward prism. DSP’s pension fund has fewer stocks compared to other pension funds — only 27, he added. The fund aims only at long-term investment, and does not believe in frequent trading.

DSP Pension Fund Managers Equity Tier I scheme has a downside capture ratio of 59 percent, which means if the benchmark goes down by 10 percent, its scheme will be down by 5.9 percent. The scheme has an upside capture ratio of 96 percent, which means if the benchmark rises by 10 percent, the scheme will be up by 9.6 percent. This, according to DSP helps the scheme perform significantly better than its benchmark during drawdowns.

As per regulation, equity pension funds are benchmarked against the S&P BSE 200 index.

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