The alternative investment funds include instruments such as REITs (Real estate investment trust), AIFs (Alternative investment funds), InvITs, CMBS and MBS (Mortgage-backed securities).
National Pension System (NPS) subscribers who have opted for active investment option can choose between four asset classes. One can choose any combination based on their risk appetite and inclination.
The four asset classes that one can invest into under the active choice include equity, corporate debt, government bonds and alternative investment funds.
It is vital to note that investment in alternative assets is permitted only in active choice while under the auto choice option — one can choose among the remaining three asset classes: equity, corporate debt, government bonds.
Returns given by alternative assets
As we can see in the table below, the maximum return of 10.42 percent was given by HDFC Pension Management followed by 9.94 given by Birla Sunlife Pension Management. The lowest return was posted by LIC Pension Fund i.e., 6.2 percent followed by 6.87 percent given by Kotak Mahindra Pension Fund.
UTI Retirement Solutions gave a return of 7.76 percent and ICICI Prudential Pension Funds gave a return of 9.35 percent.
The highest past five-year returns of 10.21 percent were given by SBI Pension Funds followed by HDFC Pension funds that gave a return of 9.18 percent.
The lowest five-year returns of 6.61 percent were given by UTI Retirement Solutions followed by 6.7 percent by Birla Sun Life Pension Management.
| Pension Fund Managers | 1-year (%) | 5-year (%) |
| SBIPF | 9.3 | 10.21 |
| LICPF | 6.2 | 7.91 |
| UTIRSL | 7.76 | 6.61 |
| ICICIPF | 9.35 | 7.69 |
| Kotak PF | 6.87 | 7.58 |
| HDFC PF | 10.42 | 9.18 |
| Birla PF | 9.94 | 6.7 |
(Source: NPS Trust; latest NAV as on July 29, 2022)
Variants of alternative assets
| Known as | Details |
| CMBS | Commercial mortgage-backed securities |
| MBS | Mortgage-backed securities |
| REITs | Real estate investment trust |
| AIFs | Alternative investment fund |
| InvITs | Infrastructure investment trust |
Lately, NPS rolled out a number of changes. From June onwards, National Pension System (NPS) subscribers have been given an option to change asset allocation four times a year.
This was meant to enable those subscribers who chose active asset allocation choice to tweak their portfolio and bring them in line with changing market condition and with their risk appetite.
Prior to this, subscribers could make changes in their asset allocation twice in a year.
But in the auto choice, the portfolio gets rebalanced based on the subscriber’s age and the variant of auto choice chosen. There are three options within auto choice: aggressive, moderate and conservative.
