Pension funds from across world flock to Dalal Street while India still waits

Consider this: when California Public Employees’ Retirement System (better known as Calpers), one of the world’s largest pension funds, registered as a Foreign Institutional Investor with the Securities Exchange Board of India in July 2004, there were only about a dozen and a half global pension funds active in India.

Now, as many as 152 global pension funds from 18 countries are here and the number is growing fast—46 registered in the last 12 months.

Pension funds now make up for almost 13 per cent of the 1,240-odd FIIs in the country. Last month, Microsoft registered its 401 (K) plan (the US pension system for private sector workers) with SEBI, following the who’s who of the global corporate world who have registered in recent months like Citigroup, JP Morgan Chase, Cargill, Hewlett Packard and Xerox.

Apart from regional school employees and teachers’ pension funds, even the top universities have registered—Massachusetts Institute of Technology in March 2007 and Duke University as recently as on January 8.

Countries such as Malaysia, South Korea, Northern Ireland, Australia and New Zealand have, in fact, started investing their national pension funds as well as civil servants’ pension funds in India. And on May 18, 2007, the Pension fund for members of the European Parliament entered India.

Jayanth R Varma, finance professor at the Indian Institute of Management, Ahmedabad, says, “Globally, pension funds constitute the single largest pool of managed money and they tend to be long-term investors as they have to invest for pensions to be paid 15 to 20 years from now, if not longer. So they won’t churn their money every three months and bring...