I have not been a great lover of the NPS for various reasons. One of the important reasons is that we do not have an index bond fund – so it is up to the Fund manager to decide what to pick. I hate that when I do not know the FM’s bond picking skills. Worse, when I do not know about his integrity.

The performance of income funds has also left a lot to be desired…the variance in the returns (standard deviation) is so high, that it makes no sense to talk of the average performance. The only thing attractive is the low management fee. Incompetence at a low fee is as bad as Incompetence at a high fee. Remember, winners rotate, but losers stay at the bottom. Always.

Now Moneylife has done some rudimentary research on the returns by the NPS..look at the variance in the index fund…unless something is wrong…the numbers are stunning – either way!

Here is an article….worth reading..


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  1. I do wonder why we do not have a bond index fund yet in India. Is it because the bond market is not sufficiently evolved or is it the lack of interest of fund houses? Actively managed bond funds charge about 1.5% as FMC on already low returns. This can be avoided in an index fund.

  2. even if we have an index bond fund we will have them at 1.5% – simply because it will not have enough takers to justify lower pricing. Sad, but true.

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