NPS Tier 1 Equity Scheme (E) Performance – Oct 2016

Published: October 18, 2016 at 10:12 am

Last Updated on

A look at how NPS Tier 1 Equity schemes (E) have performed. With the increase in popularity of NPS because of the clever introduction of additional tax saving benefits – which one should avoid, more and more people are searching for “best NPS pension fund manager”.

The reality is that there is nothing much to choose between the seven pension fund managers – ICICI, UTI, HDFC, Kotak, Reliance, SBI, LIC. Value Research has started maintaining returns of NPS Schemes and quick will validate the above comment.

Asset allocation is key for any portfolio, especially for NPS. I have always maintained – avoid NPS if you have a choice. If you are already a subscriber and can change asset allocation, then choose the fixed income options of Class G and Class C and avoid Class E. Read more about this: 

A Guide to investing in the National Pension System (NPS)

The reason for avoiding equity in NPS is simple. There are better choices out there. Although NPS fund managers can now actively manage the equity portfolio, I cannot see them beating mutual funds. However, to be fair to them, the decision to allow such active management is quite recent and we need to give them time.

At the same time, one must also keep in mind that NPS expenses have gradually been increasing. Active management will only increase it further – making it more difficult for a fund manager to beat the index.

As many of you know, I have NPS by default and sadly 40% of my retirement corpus is in there. Govt employees will soon be able to change the asset allocation from max 15 equity to higher. However, I will never do this. I prefer to let NPS remain a debt fund.

Obtaining NPS historical NAV data is a pain. ICICI offers it in an Excel. UTI in a PDF file, others online with restrictions of one month at a time. I have taken the easiest two choices – ICICI and UTI Tier Equity schemes and calculated rolling returns against the Nifty total returns index (including dividends). Both these funds are for private NPS subscribers.

ICICI Tier 1 Class E vs UTI Tier 1 Class E

nps-icici-t1-e-vs-uti-t1-e

As mentioned above, not much to differentiate between the schemes since mid-2009.

ICICI Pru Tier 1 Class E vs Nifty TRI – 3-year rolling returns

nps_icici-t1-e-3y
No of data points ~ 1000

ICICI Pru Tier 1 Class E vs Nifty TRI – 5-year rolling returns

nps_icici-t1-e-5y
No of data points ~ 590

ICICI Pru Tier 1 Class E vs Nifty TRI -7-year rolling returns

nps_icici-t1-e-7y
No of data points ~ 100

As is obvious from these graphs, the ICICI Tier 1 Class E-fund has barely beat the total returns index. This is no doubt a good achievement, considering the limitations. However, there are better choices out there.

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Even a so-called “has-been” under-performer like HDFC Top 200 has done better.

hdfc-top-200-nps-icici-t1-e-vs-uti-t1-e

Is that a fair comparison? Not to the NPS schemes but fair enough for us to realise that there are plenty of better choices out there, which are easy enough to find.

If it is any consolation, these schemes have beat JM Equity fund 🙂

jm-equity-nps-icici-t1-e-vs-uti-t1-e

Other NPS articles

NPS Calculator: How the National Pension Scheme works

NPS investments are mutual fund investments!

How to make online contributions to NPS Tier I and Tier II accounts

Stay away from Corporate NPS, if You Wish to Retire ASAP!

National Pension Scheme (NPS): Do not invest even if you get tax benefits!

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M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Linkedin
Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. For speaking engagements write to pattu [at] freefincal [dot] com

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1 Comment

  1. Hi Pattu sir, quite interesting article, also kindly compare the holdings of kotak(E) with others, this amc actually has large cap mfs in its nps (E). Which implies the index investing has actually beaten large cap mfs. The comparison between hdfc200 vs index isnt quite the same as hdfc has a wider mandate.

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