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HDFC, Birla Sun Life NPS corporate debt funds deliver double-digit returns

NPS corporate debt funds fail to beat benchmark over three and five-year timeframes

January 08, 2021 / 10:49 AM IST

Corporate bond mutual funds have had a good run in 2020 on the back of lower yields. National Pension Fund (NPS) corporate debt funds, too, reported stellar returns, with majority of pension fund managers delivering double-digit returns over three-year return horizon.

NPS Scheme C funds outperformed their corporate bond mutual fund peers by a distance, data as on January 5, 2021 from Value Research  showed.  However, none of the pension fund schemes managed to beat the benchmark CCIL Bond Broad – TRI (11.03 percent annually over three years). HDFC Pension Fund, which has been a consistent performer across categories, topped the return chart with 10.44 percent, followed closely by Birla Sun Life Pension Scheme with 10.41 percent annually over three years.

Better returns than mutual funds

In the five-year return period, three funds – HDFC (10.17 percent), SBI (10.02 percent) and ICICI Prudential (10.01 percent) pension funds – notched up double-digit returns, outperforming the benchmark (9.99 percent) in the process. All NPS corporate debt funds scored over their mutual fund counterparts over five years as well.

NPS is set for a major overhaul this year, with the Pension Funds Regulatory and Development Authority (PFRDA) floating request for proposals for new pension fund managers. Fund management charges are set to go up from the minuscule one basis point at the moment. Despite a potential rise in investment management fee, NPS funds – primary retirement account (Tier-I) and investment account (Tier-II) – will still be the cheapest instruments for long-term retirement planning. The pension regulator has capped the maximum fee, which is linked to assets under management (AUM) at 0.09 percent, while the floor is set at 0.03 percent. In addition, intermediary and custodian charges will amount to 0.03 percent.
Moneycontrol PF Team
first published: Jan 8, 2021 10:49 am

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