All contributions received in the individual pension accounts of the participants are transmitted to different sub-funds of the pension in the capital markets, debt and the money markets. Each sub-fund specializes in one investment class. The three VPS sub types include:
Equity Sub-Fund
The process of increasing capital via investing in stocks is called Equity. The aim of equity sub-fund is to receive long term capital growth. Investment is done predominantly in equity securities, investing as low as 90% (at all times) of its net asset value in listed shares.
Debt Sub-Fund
Debt financing means funds borrowed by business. The aim of debt sub-fund is capital preservation along with deliverance of income. Investment is done primarily by tradable debt securities such as bonds and treasury bills with an average duration of the investment portfolio of the sub-fund, not beyond five years.
Money Market Sub-Fund
A sub fund where investment is earned via interest for shareholders while still keeping a net asset value (NAV), is called money market sub fund. The aim of money market sub-fund is to provide regular income along with capital preservation. Money market’s portfolio comprised of short-term (less than a year) securities with an average duration of the sub-fund not exceeding 90 days.
Allocation Schemes
A pension Fund Manager offers five allocation schemes for a participant to choose from. The contributions made towards the scheme shall be allocated among the units of sub funds at Net Asset Value, as per the selected Allocation Scheme, from amongst the following five schemes offered by the pension fund.
Selection of any Allocation Scheme will allow one to adopt a dedicated investment strategy, rendering risk/return requirements, in a combination of any two or more of the above Sub-Funds.
