If you’ve parked your retirement savings in the National Pension System (NPS), your future appears to be in safe hands. All the five fund managers of the NPS have delivered above-average, market-beating returns across asset classes and timelines.

The NPS funds are invested in the three broad categories of equity (mainly Nifty stocks), corporate debt and government securities. In the equity portion, all the funds managed to equal or deliver 50-100 basis points more than the Nifty over one-, three- and five-year timeframes.

But it is in managing corporate debt that fund managers have done a spectacular job, what with the returns being 1.7-3.5 percentage points more than the debt mutual funds over one-, three- and five-year periods.

This performance is repeated with government securities as well, with all the fund managers managing to beat the gilt funds category convincingly.

There has been a stellar rally in equity markets over the last couple of years. With 10-year G-Sec yields softening from 9 per cent levels to 7.7 per cent, bond markets, too, have rallied. NPS fund managers certainly have managed to latch on to the rallies in both debt and equity markets.

The best fund manager

So, which fund manager is the best performer? Though there are a couple of marginal outperformers in ICICI and SBI, the other fund managers, including UTI, Kotak and Reliance, aren’t too far behind.

Barely 50-75 basis points separate the best performer and the lower-placed ones across asset categories and time-lines. For instance, over a three-year period, the returns from fund managers have been as follows — Equity: 18.4-18.9 per cent; Corporate debt: 11.4-12 per cent; G-Secs: 11.2-11.9 per cent.

ICICI has been the best fund manager across categories.

SBI, while being especially good in the G-Sec category, has also delivered well.

These two fund managers are likely to be the most preferred among the five. UTI, Kotak and Reliance have also put up a reasonable show.

How did they do it?

What has the modus operandi been? In the equity portion, most fund managers prefer to invest in stocks from the Nifty basket, though it may not exactly replicate the index in terms of weightage given to individual stocks. This active management has helped them outperform the NSE index.

In the corporate debt category, fund managers mostly choose ‘AAA’-rated securities (75-85 per cent), and make some allocations to ‘AA’ rated instruments as well. Currently, corporate debt portfolios carry a maturity profile of 8-10 years and a yield-to-maturity of 8.4-8.6 per cent.

In the G-Secs category, the preference across the board is for longer tenure debt. Typically, government securities maturing in 10-22 years are chosen, going by the fund managers’ current portfolio.

At a low cost of about 0.5 per cent and with low-risk investments, NPS fund managers have indeed given investors a lot to cheer about.

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