NPS equity schemes lag Nifty 50, large-cap mutual fund returns
None of the seven NPS equity funds, or Schemes E, outperformed the Nifty 50 TRI over three and five-year return periods
October 29, 2020 / 02:16 PM IST
The phenomenon of large-cap mutual funds not being able to even match the benchmark Nifty 50 TRI index over the past few years is prevalent in the equity schemes of NPS fund managers too.
What is worse, most NPS equity schemes delivered lower than even the large-cap mutual fund category average.
None of the seven NPS equity funds – Schemes E – outperformed Nifty 50 TRI over three- and five-year return periods.
NPS equity schemes reported returns in the range of 1.65-4.37 percent annually over three years, as per data as on October 27, 2020 from mutual fund tracking firm Value Research. On the other hand, Nifty 50 delivered return of 5.71 percent during the period.
Only two pension funds – HDFC Pension Fund (4.37 percent) and Birla Sun Life Pension Scheme (4.36 percent) - beat their large-cap mutual fund peers (4.14 percent) over the three-year period. ICICI Prudential Pension Fund and SBI Pension Fund were next on the list with 3.76 per cent and 3.75 percent respectively. LIC Pension fund brought up the rear with 1.65 percent.
Over the five-year period, HDFC Pension Fund was the top performer with 8.49 percent annual returns, followed by Kotak Pension Fund with 7.72 percent. Both outperformed the large-cap mutual fund category average (7.61 percent) during the period, but fell short of the benchmark’s 8.68 percent. Other NPS scheme E funds yielded returns between 6.02 percent and 7.59 percent.
The government securities schemes of NPS fund managers have delivered extremely well. Even the corporate bond schemes C have outperformed benchmarks and even mutual funds over the long term.
But when it comes to equities, NPS fund managers have fallen behind and quite significantly at that.
Given that NPS allows you to choose your allocation among equities, government securities and corporate debt, investors with a higher proportion of equities in their portfolios would have suffered lower returns.