Risk-adjusted performance evaluation of pension fund managers under social security schemes (National Pension System) of India

Abstract

ABSTRACT Along with the Employees Provident Fund Organisation (EPFO) and central civil services pension schemes, the government of India implemented National Pension System (NPS) architecture in 2009 to provide social security benefits to the poor and underprivileged section of the society in their post-retirement time. Accordingly, various schemes were offered by the listed private Pension Fund Managers (PFMs), and subsequently, the no. of subscribers and corpus also increased over a period of time. But whether the PFMs were able to meet the expectations of the subscribers is the main focus of this study. Using data from the NPS trust organisation’s annual reports and the Bombay Stock Exchange for 2011–2019 market returns, we assess the performance of the listed PFMs under different NPS schemes based on risk-adjusted performance measures viz. Sharpe, Treynor and Jensen’s alpha. Our analysis reveals that LIC Pension Funds Ltd has dominated and performed better than other PFMs under Sharpe ratio & Jensen’s performance measures. The performance of PFMs under Treynor’s ratio indicated the variation in different NPS schemes. However, HDFC pension fund managers outperformed over the other PFMs in the equity and fixed income segment of NPS schemes. The findings of the study imply the holistic comparison of the performance of all the pension fund managers listed under various NPS schemes in India. Besides, the application of risk-adjusted performance measures makes it relevant to catch the attention of the stakeholders such as PFRDA, subscribers and especially the PFMs.