PFRDA Proposes NPS Fund-of-Funds Structure to Invest in Select AIFs

The Pension Fund Regulatory and Development Authority (PFRDA) is preparing to launch a dedicated National Pension System (NPS) fund of funds platform to invest pension assets in selected alternative investment funds (AIFs).  

The initiative reflects the regulator’s broader effort to expand domestic pools of patient capital and support India’s private market ecosystem, PFRDA chairman S Ramann said at IVCA DII and Exits 2025. 

Key Development: NPS Fund of Funds for AIF Allocation 

PFRDA has classified all alternative investment instruments into equity and debt, following the Securities and Exchange Board of India’s decision to designate Real Estate Investment Trusts as equity.  

Ramann said the regulator has spent recent years refining the classification of alternate assets, improving governance frameworks and creating a centralised and transparent NPS fund of funds platform. According to him, the new system will allow pension funds of all sizes to deploy capital with greater confidence and discipline. 

Statements and Policy Intent 

Ramann emphasised that India’s next stage of capital formation should rely on strong domestic capital pools. Pension assets are inherently long-term and stable, and PFRDA’s objective is to create structures that enable meaningful participation in private markets.  

While acknowledging that risk capital is cyclical, he noted that a diversified AIF portfolio supported by strong oversight and longer investment horizons can still create value for subscribers. 

He added that India cannot depend solely on seven to ten-year fund structures and needs to consider longer tenor and perpetual vehicles that align with the nature of retirement savings. 

Read More: Govt Employees Get 2 New Auto Investment Options in NPS, UPS! 

Conclusion 

PFRDA’s move to introduce an NPS fund of funds represents a strategic step towards deepening domestic institutional capital in private markets. By encouraging pension funds to access diversified AIF portfolios within a robust governance framework, the regulator aims to strengthen long-term capital formation and position domestic investors as key contributors to India’s growth trajectory. 

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