S Ramann, chairperson of the Pension Fund Regulatory and Development Authority (PFRDA), said the move follows efforts to create a workable framework that allows pension assets to flow into alternatives such as private equity and venture capital.
“We have now earmarked about 1% of the AUM for investments into AIFs,” Ramann said at an event in Mumbai. The National Pension System currently manages around ’17 lakh crore and is expanding at roughly 10-11% annually, he said.
Since October 2025, the pension watchdog has been progressively widening both investable categories and quantitative ceilings to ensure the flow of local institutional corpuses into higher-yielding assets. The current funds would be part of this expanding investment remit.
Earlier, it allowed investments into equities, other listed assets such as exchange-traded funds (ETF) and bullion-based traded securities. Domestic institutional capital has long been seen as a missing piece in the alternatives ecosystem, which has historically relied heavily on foreign investors.
To facilitate allocations, the regulator has created an investment framework through the NPS Trust that will allow alternative fund managers to submit proposals and seek allocations from pension assets. The platform is currently undergoing testing before being rolled out.
The private equity and venture capital industry has been seeking greater participation from large domestic institutions such as the Employees’ Provident Fund Organisation and the Life Insurance Corporation, both of which manage large pools of long-term savings. Ramann said building stronger governance and transparency standards across the industry would be essential to attract such capital. “The ecosystem must demonstrate the efficiencies and transparency expected globally,” he said, urging fund managers to adhere to high governance standards to build confidence among institutional investors.
This is required as the pension system is expanding rapidly, particularly among private sector workers.
Contributions from non-government subscribers are growing at about 24% to 28% annually outpacing the 8% to 11% growth seen in government pension assets.
“Historically, pensions in India have largely been associated with the government,” Ramann said. “That perception has to change as more private sector workers begin contributing to retirement savings.”