The National Pension System’s Multiple Scheme Framework has completed six months, highlighting how different equity allocations impact short-term returns. Investors can now choose funds based on risk appetite, though performance varies significantly between equity-heavy and balanced schemes. Understanding fund manager flexibility and asset mandates is more important than looking at recent returns alone.
The National Pension System (NPS) Multiple Scheme Framework (MSF), which allows subscribers to select retirement portfolios tailored to their risk tolerance, has now been active for six months. As of July 15, 2026, the performance data offers an early look at how various asset allocation strategies have held up during recent market fluctuations. While six months is a very short period for retirement-focused investments, the data reveals how different levels of equity exposure influenced portfolio swings.
Impact of Equity Allocation on Returns
Short-term performance has been largely dictated by the percentage of equity in each scheme. Portfolios with a higher equity tilt—often exceeding 70%—experienced more noticeable price changes during the recent market downturn compared to balanced funds. For instance, in the equity-oriented segment, the UTI Wealth Builder NPS Equity Scheme recorded a 2.19% return, while others like LIC Growth Plus and HDFC Equity Advantage Fund showed negative returns of 3.98% and 3.95% respectively.
Hybrid and balanced funds, which hold a larger portion of debt or alternative assets, generally provided more stability. In the balanced category, Aditya Birla Sun Life Secure Future led with a 2.77% return, and SBI Akshay Dhara followed with a 1.74% gain. This contrast illustrates that while equity-heavy schemes aim for higher growth, they also carry the risk of sharper declines in volatile markets.
Understanding Fund Mandates
For investors evaluating these schemes, looking only at past returns can be misleading. A critical factor is the 'permitted asset allocation range' defined by the fund manager. Some schemes allow for a wide swing in equity exposure, such as moving between 60% and 100%, while others follow a tighter band. A scheme with a wider mandate could take on significantly more risk than a peer with a more rigid structure, even if they currently look similar. Investors should review the specific investment mandate of each scheme to understand the potential for future risk.
Diversification Beyond Stocks and Bonds
Some of the new MSF offerings have introduced alternative assets like Gold, Silver, REITs (Real Estate Investment Trusts), and InvITs (Infrastructure Investment Trusts). While these allocations are currently small, they represent a shift toward broader diversification. These assets are intended to help stabilize portfolios when traditional stock and bond markets face pressure. Currently, HDFC Equity Advantage Fund, ICICI Prudential NPS DREAM, and HDFC Surakshit Income Fund have attracted the largest Assets Under Management (AUM) in this new framework. As these schemes continue to operate, the next important development for investors to track will be how fund managers adjust their asset mixes in response to changing market conditions and whether the performance gap between conservative and aggressive funds persists.