The Indian pension fund industry has grown slowly but steadily, with total assets under management (AUM) across all NPS Tier-I and Tier-II schemes, APY, and other schemes exceeding Rs 15 lakh crore as of September 2025.
The Pension Fund Regulatory and Development Authority (PFRDA) is reportedly considering allowing pension funds to invest in commodities like gold and silver as well as unlisted shares through Alternate Investment Funds (AIFs).
Experts say this could provide long-term stability and diversification, giving investors a broader range of options for retirement planning. This assumes significance as sources indicate that guidelines may be finalised by the end of October, following board approval.
Rahul Bhagat, CEO of DSP Pension Fund, says that commodities like gold and silver were not included previously but if approvals come in it will give investors access to a broader asset class. “It also acts as a natural hedge for portfolios, particularly when other asset classes are underperforming, especially amid global uncertainties and conflicts. From a portfolio perspective, it’s a positive step,” he said.
Currently, funds can allocate 5% to alternative assets, and discussions are underway to increase it to 10%. Experts believe that a modest allocation of 10–15% could stabilise portfolios and provide a counterweight to equity volatility.
Kotak Mahindra Pension Fund CEO Subhasis Ghosh also welcomed the move. “Introducing familiar instruments like gold and silver ETFs can address the perception that alternate assets are risky. They’re low-cost, easy to manage, and count toward the audited assets of the pension fund,” he said.
Incidentally, the development comes at a time when gold prices have surged globally, with spot gold near $3,776 per ounce and 24-karat gold in India priced at Rs 11,537 per gram. Analysts note that the rally, driven by expectations of US interest rate cuts, geopolitical tensions, and strong demand for safe-haven assets, makes gold a timely hedge for long-term portfolios such as pensions.
Currently, pension fund managers invest across four asset classes — equity, corporate bonds, government securities, and alternate assets. Equity covers the top 200 stocks in India by market capitalisation, while alternate assets include instruments such as perpetual bonds, REITs, and InviTs.
The alternate assets category currently accounts for about Rs 850 crore of the total Rs 15 lakh crore NPS corpus. While these assets remain small, they offer high potential for diversification.
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More Reforms Needed
Both experts emphasised that broader reforms are crucial for the growth of the pension sector. Awareness about NPS, they agreed is still limited, even though pension planning is essential for both employed and self-employed individuals.
Bhagat said, “For the pension sector to grow, several reforms are needed. The new chairman is looking to take the industry forward over the next five years, and we can expect many changes. These include opening up new asset classes, reviewing fee structures, and improving distribution.”
He added that currently, fund management fees are low, which limits incentives to market these products. “A balance is needed so the product remains low-cost but also becomes more visible to investors.” he said.
The Indian pension fund industry has grown slowly but steadily, with total assets under management (AUM) across all NPS Tier-I and Tier-II schemes, APY, and other schemes exceeding Rs 15 lakh crore as of September 2025.
Equity (E) Tier-I funds manage roughly Rs 1 lakh crore, led by HDFC Pension Fund (Rs 65,132 crore), SBI Pension Funds (Rs 24,584 crore), and ICICI Prudential Pension Fund (Rs 23,276 crore). Government Securities (G) Tier-I funds have a total AUM of over Rs 1.2 lakh crore, making them the largest asset class by AUM, appealing to investors seeking stability.
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