EFFECT OF NEW ENROLMENT AND ASSET SIZE ON FUND PERFORMANCE: EVIDENCE FROM INDIAN NPS EQUITY SCHEMES
Keywords:Investment Decision, Financial Services, Pension Schemes, Fund Performance.
Rapidly changing socio cultural behaviour and financial market scenarios are forcing Indians think about dedicated corpus for their pension requirements. Changing dynamics of Indian demographic, social lifestyles and employment structure influenced Indian Government to introduce some social security scheme for Indian citizens. NPS is one such initiative by Indian Government to bring systematic saving habit among Indians. Safe and steady returns are the primary priorities of Pension fund subscribers, Government will have to reassure the same to make these schemes popular and acceptable. Government issued some strict mandates to fund managers as to how they can invest in different asset classes keeping the fund contributors’ interest in the mind. Strict investment guidelines and increased expectations from the investors put a lot of pressure on fund manager performance. NPS contribution will allow an additional deduction of INR 50,000 over and above the normal limit of INR 1, 50,000 towards eligible tax saving investments is attracting some additional investment towards NPS. Tax applicability on maturity is not very attractive at the moment in NPS schemes. Expense ratios compared to any other investment avenues available for investor is very attractive since government fixes the bare minimum charges. Since incentives are not attractive for POPs, NPS enrolments are not pushed hard. Trend shows, slowly NPS has started getting acceptance and fund sizes are increasing. With the limited scope, investment choices funds are performing well as of now. Large fund size may offer little additional scope for fund managers to play with. This study aims at establishing some empirical evidences on the effect of number of subscribers and fund size (AUM), on the fund performance.
Current study is focused on finding out the relationship between the number of subscriber and AUM on return from the NPS all citizen equity schemes. We have also included diversification effect and year of experience of these schemes as independent variables. We observed in short term AUM and Number of Subscriber will influence fund performance but not in the long term. Whereas fund experience and portfolio holding are not significantly impacting fund return both in short and in long term.