Pension Funds Regulatory Development Authority (PFRDA) has given the green light for NPS (National Pension System) money to be invested in overnight funds and all such short duration funds. The regulator said it has decided to allow the pension funds to invest in overnight funds and all such short duration funds as may be permitted by the SEBI from time to time for the investment of surplus funds for ‘short-term investment’.
Accordingly, the PFRDA has allowed the investments with the condition that the average total assets under management of the AMC for the recent six month period should be at least Rs 5,000 crore.
The PFRDA has said that the investment made by pension funds in overnight funds and all such short duration funds will be eligible for payment of investment management fee (IMF) to pension funds.
Overnight funds are mutual fund schemes which invest in money market securities having a maturity of one day. In liquid mutual funds, the securities have a maturity of up to 91 days only. In ultra short duration funds, instruments are invested in such a way that the Macaulay duration of the portfolio is between three months and six months.
Overnight funds are a new debt fund category. They have Rs 20,000 crore invested in 27 schemes. One year return of overnight funds ranges between 5.13% to 5.90%
Liquid funds are an old category. This collection of funds has Rs 4.8 lakh crore invested in 40 schemes. One year returns range between 4.51% to 7.59%
Ultra short duration funds have Rs 94,000 crore invested across 27 schemes. The one year return ranges between -1.92% to 14.67%.