Mutual Fund has launched the Retirement Fund NFO, now open for subscription. This retirement fund carries a lock-in period of 5 years. Investors often wonder whether to opt for simple mutual funds or solution-based retirement funds for retirement planning. Should you consider investing in the PGIM Retirement Fund NFO? Additionally, what alternative investment avenues exist for retirement planning?
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PGIM Retirement Fund NFO Issue Details
Here are the issue details of the NFO.
| Fund Name | PGIM India Retirement Fund |
| NFO Opens | 26-Mar-24 |
| NFO closes | 09-Apr-24 |
| Scheme reopens for continuous purchase/sale | Within 5 working days |
| Minimum Application Amount | Rs 5,000 and in multiples of Rs 1 thereafter |
| Minimum SIP | Rs 1,000 for 5 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | Nil |
| Risk | Very High Risk |
| Benchmark | S&P BSE 500 Index TRI |
| Fund Manager | Vinay Paharia |
PGIM Retirement Fund NFO – What is the investment objective?
PGIM India Retirement Fund, is an open ended retirement solution oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier).
The investment objective of the scheme is to provide capital appreciation and income to investors in line with their retirement goals by investing in a mix of securities comprising of equity, equity related instruments, REITs and InvITs, and fixed income securities.
However, there can be no assurance that the investment objective of the scheme will be achieved. The scheme does not guarantee/ indicate any returns.
What is the allocation pattern in this mutual fund scheme?
This fund invests pattern is as follows:
| Type of instruments | Min % | Max % | Risk Profile |
|---|---|---|---|
| Equity & equity related instruments | 75% | 100% | Very High |
| Debt Securities and Money Market Instruments, including cash, Triparty Repo and equivalent and units of mutual funds |
0% | 25% | Low to Medium |
| Units issued by REITs and InVITs | 0% | 10% | Medium to High |
Why should you invest in PGIM Retirement Fund NFO?
This retirement fund has a lock-in period of 5 years or till retirement age whichever is earlier. This can help investors to invest for a medium to long term in such funds.
PGIM Retirement Fund NFO – Risk Factors or Negative Factors
One should consider some of these risk factors / negative factors before investing.
This retirement fund has a lock-in period of 5 years or till retirement age whichever is earlier. While it is good that the investment would get locked and such investment would grow, in case of emergency, one cannot withdraw their investment.
This fund invests between 65% to 100% in equity, which is at high risk.
This fund would invest in debt instruments where there is interest rate risk, reinvestment risk, liquidity risk and default risk.
The fund also invests in REITs and InvITs, which are considered riskier assets.
For complete risk factors, one can refer SID / KIM / Prospectus of the mutual fund schemes.
You should also know that PGIM Emerging Markets Fund was one of the Worst Performing Mutual Funds in the Last 10 Years that generated 1% annualised returns.
How is the Performance of Existing Retirement Funds?
Existing retirement funds has generated 5% to 22% returns in the last 5 years. Here is the scheme wise performance.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| ICICI Prudential Retirement Fund – Pure Equity Plan | 29% | 22% | – |
| HDFC Retirement Savings Fund – Equity Plan Plan | 27% | 22% | – |
| ICICI Prudential Retirement Fund – Hybrid Aggressive Plan | 21% | 18% | – |
| HDFC Retirement Savings Fund – Hybrid- Equity Plan Plan | 18% | 17% | – |
| Tata Retirement Savings Fund Progressive Plan | 16% | 15% | 18% |
| Nippon India Retirement Fund – Wealth Creation Scheme | 21% | 14% | – |
| Tata Retirement Savings Fund Moderate Plan | 15% | 14% | 17% |
| Aditya Birla Sun Life Retirement Fund – The 30s Plan | 12% | 12% | – |
| Aditya Birla Sun Life Retirement Fund – The 40s Plan | 11% | 11% | – |
| UTI Retirement Fund | 14% | 11% | 11% |
| UTI Retirement Benefit Pension Fund Plan | 14% | 11% | 11% |
| ICICI Prudential Retirement Fund – Hybrid Conservative Plan | 10% | 10% | – |
| Franklin India Pension Plan | 10% | 10% | 11% |
| HDFC Retirement Savings Fund – Hybrid-Debt Plan Plan | 10% | 10% | – |
| Nippon India Retirement Fund – Income Generation Scheme | 8% | 9% | – |
| Tata Retirement Savings Fund Conservative Plan | 8% | 9% | 10% |
| ICICI Prudential Retirement Fund – Pure Debt Plan | 6% | 8% | – |
| Aditya Birla Sun Life Retirement Fund – The 50s Plan | 7% | 7% | – |
| Aditya Birla Sun Life Retirement Fund – The 50s Plus – Debt Plan | 5% | 5% | – |
PGIM Retirement Fund NFO – Should you invest?
This retirement fund comes with lock-in period of 5 years or retirement age whichever is earlier. There is nothing great about such schemes except that there is a lock-in period and during that period, investors cannot redeem the funds and this would help in compounding growth.
However, lock-in period is the biggest negative factor in such schemes. Instead of investing in such retirement funds, investors can invest in aggressive hybrid funds or balanced advantage funds where there is liquidity + one can expect higher returns if they invest for over 5 years. If you see, aggressive hybrid funds invest in similar lines and generated 12% to 25% annualized returns in the last 5 years. Similarly Balanced Advantage Funds generated 10% to 18% annualized returns in last 5 years. I feel these are some of the alternative options in place of retirement funds.
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