PFRDA sets up expert panel SAARG to modernise NPS investment framework

PFRDA has set up a high-level expert panel, SAARG, to review and modernise the NPS investment framework, focusing on asset allocation, risk governance and long-term returns

The Pension Fund Regulatory and Development Authority (PFRDA) has constituted a high-level committee of investment experts for Strategic Asset Allocation and Risk Governance (SAARG) to review, recommend and modernise the investment framework under the National Pension System (NPS).

 

According to the official press statement, the committee has been mandated to undertake a comprehensive review of the existing NPS investment guidelines, benchmark them with leading global pension systems, and align them with the evolving Indian investment ecosystem. The objective is to strengthen the investment architecture of NPS to support long-term retirement wealth creation, enhance diversification, improve risk management practices and expand subscriber choice.

 

 

SAARG will be chaired by Narayan Ramachandran, former country head and chief executive officer of Morgan Stanley India, who is currently the chairman of TeamLease Services Ltd. The panel comprises eminent experts from capital markets, asset management and securities law, including former Sebi whole-time member Ananth Narayan, First Global founder and CMD Devina Mehra, DSP Mutual Fund MD and CEO Kalpen Parekh, former HDFC Mutual Fund CIO Prashant Jain, PPFAS Asset Management CIO Rajeev Thakkar, Motilal Oswal co-founder Raamdeo Agrawal, ICICI Prudential AMC CIO Sankaran Naren, Regstreet Law Advisors founder Sumit Agrawal, and PFRDA executive director Ashok Kumar Soni.

 

According to PFRDA, the committee’s scope includes a review of strategic asset allocation frameworks, the introduction and evaluation of asset classes, performance measurement and accountability mechanisms, asset-liability management (ALM) practices, valuation standards for alternative investments, portfolio stability and liquidity optimisation measures, governance and intermediary architecture, and the integration of sustainability considerations in investment decision-making.

 

The detailed terms of reference provide for a foundational review of NPS investment guidelines across government and non-government sectors, benchmarking with global pension systems, and recommendations on reforms. The panel will also examine the feasibility of introducing new asset classes to mitigate geopolitical, macroeconomic and market-cycle risks, recommend optimal asset allocation across equity, debt, money market and alternative assets, and suggest prudential exposure and concentration limits.

 

In addition, SAARG will review the existing performance benchmarking framework for pension funds, recommend comprehensive risk management practices, and propose ALM principles aligned with long-term pension liabilities. The committee will also examine valuation norms and investment strategies for Alternate Investment Funds (AIFs), modalities for earmarking government securities under the held-to-maturity category to enhance portfolio stability, and the feasibility of securities lending and borrowing mechanisms and triparty repo arrangements to improve liquidity management.

 

Governance-related aspects, including custodial architecture and optimisation of end-to-end investment processes across NPS intermediaries, will also be reviewed. Sustainability considerations such as climate transition risks and net-zero pathways are part of the mandate, along with enhancing subscriber investment choices, including lifecycle and target-date products, and determining an optimal mix of active and passive strategies.

 

“The constitution of SAARG reflects PFRDA’s continued commitment to strengthening the NPS investment framework in a forward-looking manner and ensuring that it remains resilient, diversified and aligned with the evolving needs of subscribers,” the regulator said.

 

The committee has been given a tenure of nine months to examine the issues and submit its report along with recommendations to PFRDA.