State Bank of India (SBI), Life Insurance Corporation (LIC) and UTI-AMC will manage the Government’s new pension fund from June 2008. Of the Rs 2,000-crore fund, SBI that will manage 55 per cent and charge 3 basis points from the investors. In an interview to Sandeep Singh, SBI Funds Management managing director and chief executive officer Syed Shahabuddin explains the structure of the pension fund and talks about the company’s future plans.

• Are you planning to come up with a new company to manage the pension funds?

SBI will be floating a new company; in fact they have registered a company for managing the pension funds.

• What kind of investment structure will be followed?

The investment structure is being negotiated with the Government. After we get a benchmark rate from the Government, we will discuss and decide the investment pattern with them for a reasonable rate similar to the benchmark rate. The modalities will be worked out with the Government, as one cannot expect equity returns from us by investing the money in fixed deposits.

• SBI is talking of a 3 basis points charge. If you invest in equity funds that charge an entry load of 2.5 per cent, how will you manage?

We might not pay this 2.5 per cent charge upfront. Firstly, this three basis point is the net charge and does not include expenses. Any expense incurred, will be passed on. Secondly, the fund will not invest in any other equity scheme. The company itself will be an asset management company and will directly invest in equity. Even if it invests in fund of funds schemes, it will select funds where it may not have to pay this 2.5 per cent upfront charge.

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