The National Pension System’s (NPS) government security funds have turned in an impressive performance at a time when other secure fixed income avenues’ returns are trudging lower. Leading banks’ fixed deposit interest rates for longer tenures of 5-10 years hover around 5.4-5.5 per cent, in the backdrop of a benign interest rate environment.
All NPS fund managers’ scheme G (Tier I account) returns have outpaced the benchmark CCIL All Sovereign Bond TRI across three and five-year periods, as per data from Value Research. G-sec funds delivered returns of 9.22-10.68 per cent annually over three years, compared to the benchmark’s 9.13 per cent returns during the same period. They did better than gilt mutual funds, which returned 7.79 per cent and 8.61 per cent, respectively, over three and five-year timeframes.
LIC shines in the category
LIC Pension Fund was the top performer in this category, clocking double-digit return of 10.68 per cent. It was followed by SBI Pension Fund and ICICI Prudential Pension Fund, with 9.91 per cent and 9.67 per cent returns respectively over a three-year period ending September 18, 2020. UTI Retirement Solutions found itself at the bottom, delivering 9.22 per cent, but still managed to outperform the benchmark.
In the five-year category, all pension fund managers with a long-term track record, except one – UTI Retirement Solutions – have reported double-digit returns. LIC Pension Fund was ahead of the rest in this timeframe, too, recording an impressive 11.21 per cent return. Kotak Pension Fund ranked second on the list with 10.32 per cent, closely followed by HDFC Pension Fund that delivered a 10.31 per cent return annually over five years. SBI Pension Fund and ICICI Prudential Mutual Fund recorded returns of 10-30 per cent and 10.13 per cent respectively. UTI Retirement Solutions’ scheme G fetched 9.78 per cent in comparison, which is still higher than the CCIL All Sovereign Bond TRI performance of 9.71 per cent.
With no credit risk, and reasonably solid returns, investor interest in gilt fund investments in on the rise.
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