**Executive Summary**
The Pension Fund Regulatory and Development Authority (PFRDA) has established a Committee for Strategic Asset Allocation and Risk Governance (SAARG) to review and modernize the investment framework of the National Pension System (NPS). The SAARG will benchmark NPS investment guidelines against global standards, enhance diversification, and improve risk management. The committee is expected to submit its report with recommendations to PFRDA within nine months.
**Key Points / Main Content**
* **Committee Composition & Leadership:**
* SAARG is chaired by Shri Narayan Ramachandran.
* The committee comprises experts from capital markets, asset management, and securities law.
* **SAARG Mandate:**
* Review and modernize the investment framework under the NPS.
* Strengthen the investment architecture of NPS to support long-term retirement wealth creation and expand subscriber choice.
* **Scope of Review:**
* Examine strategic asset allocation frameworks.
* Review and introduce asset classes.
* Review performance measurement and accountability mechanisms.
* Review Asset-Liability Management (ALM) practices.
* Review valuation standards for alternative investments.
* Review portfolio stability and liquidity optimisation measures.
* Review governance and intermediary architecture.
* Integrate sustainability considerations into investment decision-making.
* **Specific Review Areas:**
* Review existing NPS investment guidelines for adequacy and effectiveness.
* Benchmark NPS investment architecture with global pension systems.
* Review permitted asset classes and suggest enhancements.
* Introduce new asset classes to mitigate risks.
* Recommend optimal strategic asset allocation across asset classes.
* Define eligible investment universe and recommend prudential exposure limits.
* Examine existing benchmarking systems and recommend appropriate methodologies.
* Recommend comprehensive risk management practices.
* Recommend ALM principles aligned with long-term liabilities.
* Recommend valuation principles and investment strategies for Alternative Investment Funds (AIFs).
* Recommend modalities for earmarking a portion of G-Secs under Held-to-Maturity (HTM).
* Examine feasibility of Securities Lending & Borrowing Mechanism (SLBM).
* Recommend enabling Triparty Repo arrangements.
* Examine centralized vs Pension Fund-wise custodial architecture.
* Review and optimise end-to-end investment process flow across intermediaries.
* Assess embedding climate transition risks and net-zero pathways in asset selection.
* Review and enhance existing subscriber investment choices.
* Recommend optimal mix of active and passive investment strategies.
* Recommend on any other emerging matter impacting investment patterns, governance, risk management and subscriber outcomes.
**Impact Analysis**
**Pension Fund Regulatory and Development Authority (PFRDA)**
* **Impact:** Receives recommendations from SAARG to improve NPS investment framework.
* **Action Required:** Review and implement SAARG's recommendations.
**NPS Subscribers**
* **Impact:** Potential for enhanced retirement wealth creation, improved diversification, and increased investment choices.
* **Action Required:** Be aware of changes to NPS investment framework based on SAARG recommendations.
**Investment Experts and Asset Managers**
* **Impact:** SAARG will be reviewing the investment approaches
* **Action Required:** Be aware of changes to NPS investment framework based on SAARG recommendations.
Key Entities Referenced
PFRDA: Pension Fund Regulatory and Development Authority - the regulator that constituted the committee.
Strategic Asset Allocation and Risk Governance (SAARG): Committee of Investment Experts constituted by PFRDA to review, recommend and modernize the investment framework under the NPS.
NPS: National Pension System - the pension system whose investment framework is being reviewed by the SAARG committee.
Press Release
PFRDA constitutes Committee for Strategic Asset Allocation and Risk Governance
(SAARG)
PFRDA has constituted a committee of Investment Experts for Strategic Asset Allocation and
Risk Governance (SAARG) to review, recommend and modernize the investment framework
under the NPS.
SAARG has been tasked with undertaking a comprehensive review of the existing NPS
investment guidelines benchmarking them with leading global pension systems and 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.
The scope of the SAARG includes examination of strategic asset allocation frameworks,
introduction and review of asset classes, performance measurement and accountability
mechanisms, ALM practices, valuation standards for alternative investments, portfolio stability
and liquidity optimisation measures, governance and intermediary architecture, and integration
of sustainability considerations in investment decision-making. The detailed Terms of
Reference is placed at Annexure.
SAARG shall be chaired by Shri Narayan Ramachandran, former Country Head and CEO of
Morgan Stanley India, and comprises eminent experts from the fields of capital markets, asset
management and securities law.
No. Name of Expert Affiliation
Former Country Head and CEO of Morgan
1 Shri Narayan Ramachandran Stanley India
Currently, Chairman at Team Lease Services Ltd.
2 Shri Ananth Narayan Former Whole Time Member, SEBI
Founder & CMD First Global (PMS & Global
3 Ms Devina Mehra
funds)
3 Shri Kalpen Parekh MD & CEO at DSP Mutual Fund
CIO at 3P Investment Managers & Former CIO
4 Shri Prashant Jain
at HDFC Mutual Fund
Chief Investment Officer at PPFAS Asset
5 Shri Rajeev Thakkar
Management Pvt. Ltd.
Co-founder, Motilal Oswal
&
6 Shri Raamdeo Agrawal
Chairman and Co-founder of Motilal Oswal
Financial Services Ltd.
Chief Investment Officer at ICICI Prudential
7 Shri Sankaran Naren
AMC Ltd
8 Shri Sumit Agrawal Founder, Regstreet Law Advisors
9 Shri Ashok Kumar Soni Executive Director, PFRDA
ई – 500, टावर – ई, पाचवां तल, व(cid:658)(cid:330) ट(cid:332)ेड स(cid:336)टर, नौरोजी नगर, नई िद(cid:671)ी – 110 029
दूरभाष: 91 – 11 – 40717900, वेबसाइट: www.pfrda.org.in
E – 500, Tower – E, Fifth Floor, World Trade Center, Nauroji Nagar, New Delhi – 110 029
Phone: 91 – 11 – 40717900, Website: www.pfrda.org.inThe 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 in their long-term wealth
creation journey.
The committee shall have a time of 9 months examine and submit its report to PFRDA with its
recommendations.
ई – 500, टावर – ई, पाचवां तल, व(cid:658)(cid:330) ट(cid:332)ेड स(cid:336)टर, नौरोजी नगर, नई िद(cid:671)ी – 110 029
दूरभाष: 91 – 11 – 40717900, वेबसाइट: www.pfrda.org.in
E – 500, Tower – E, Fifth Floor, World Trade Center, Nauroji Nagar, New Delhi – 110 029
Phone: 91 – 11 – 40717900, Website: www.pfrda.org.inAnnexure – SAARG’s Terms of Reference
The Committee shall be guided by the following terms of reference in the discharge of its
mandate:
i. Foundational Review of NPS & Global Benchmarking:
Review existing NPS investment guidelines for Government and Non-Government
Sectors for adequacy, effectiveness and long-term relevance.
Benchmark NPS investment architecture with leading global pension systems and
Indian peer investment ecosystem and recommend reforms.
ii. Asset Class Review and Expansion:
Review all permitted asset classes and suggest enhancements to improve
diversification and long-term retirement wealth creation
Introduction of new asset classes to mitigate geopolitical, macroeconomic and
market-cycle risks.
iii. Strategic Asset Allocation Framework:
Recommend optimal strategic asset allocation across equity, debt, money market
and alternate assets balancing safety, liquidity and returns.
Define eligible investment universe under each asset class and recommend
prudential exposure and concentration limits.
iv. Performance Measurement & Accountability:
Examine the existing benchmarking system and recommend appropriate benchmarks
and methodologies for evaluating Pension Fund performance under NPS.
v. Risk Management & ALM Architecture:
Recommend comprehensive risk management practices covering market, credit,
liquidity, concentration and operational risks
Recommend Asset–Liability Management (ALM) principles aligned with long-
term pension liabilities
vi. Alternative Investments & Valuation Standards:
Recommend valuation principles for Alternate Investment Funds (AIFs).
Recommend suitable investment strategies for AIFs considering illiquidity, exit
constraints and long-term retirement objectives.
vii. Portfolio Stability & Liquidity Optimisation:
Recommend modalities for earmarking a portion of G-Secs under Held-to-Maturity
(HTM) to enhance portfolio stability.
ई – 500, टावर – ई, पाचवां तल, व(cid:658)(cid:330) ट(cid:332)ेड स(cid:336)टर, नौरोजी नगर, नई िद(cid:671)ी – 110 029
दूरभाष: 91 – 11 – 40717900, वेबसाइट: www.pfrda.org.in
E – 500, Tower – E, Fifth Floor, World Trade Center, Nauroji Nagar, New Delhi – 110 029
Phone: 91 – 11 – 40717900, Website: www.pfrda.org.in Examine feasibility of Securities Lending & Borrowing Mechanism (SLBM) for
generating additional wealth creation opportunities for NPS Subscribers.
Recommend enabling Triparty Repo arrangements for efficient liquidity
management.
viii. Governance & NPS Intermediary Architecture:
Examine centralized vs Pension Fund-wise custodial architecture for efficiency and
resilience
Review and optimise end-to-end investment process flow across NPS
intermediaries.
ix. Sustainability Integration:
Assess embedding climate transition risks and net-zero pathways in asset selection
under NPS
x. Subscriber Choice & Investment Design:
Review and enhance existing subscriber investment choices including lifecycle and
target-date structures.
Recommend optimal mix of active and passive investment strategies.
xi. Any other important matter:
Recommend on any other emerging matter impacting investment patterns, governance,
risk management and subscriber outcomes
ई – 500, टावर – ई, पाचवां तल, व(cid:658)(cid:330) ट(cid:332)ेड स(cid:336)टर, नौरोजी नगर, नई िद(cid:671)ी – 110 029
दूरभाष: 91 – 11 – 40717900, वेबसाइट: www.pfrda.org.in
E – 500, Tower – E, Fifth Floor, World Trade Center, Nauroji Nagar, New Delhi – 110 029
Phone: 91 – 11 – 40717900, Website: www.pfrda.org.in