Key Takeaways
- • Nepal's government has expanded investment mandates for three state-operated pension funds—Employees Provident Fund (EPF), Citizens Investment Trust (CIT), and Social Security Fund (SSF)—to include mutual funds, private equity, and venture capital, effective via presidential ordinance issued May 6, 2026.
- • The EPF manages Rs 500 billion across 578,000 general contributors and 96,000 pension fund contributors; the CIT oversees Rs 300 billion from 800,000+ Nepalis; the SSF holds Rs 102 billion from 2.75 million contributors as of February 2026—totaling approximately Rs 902 billion in deployable capital.
- • Previously restricted to fixed deposits, government bonds, and hydropower company shares, the three funds can now access Securities Board of Nepal-approved mutual funds and venture capital instruments, substantially broadening portfolio diversification and institutional capital availability for startups and enterprises.
- • The policy shift aims to generate higher returns for contributors while simultaneously boosting liquidity in Nepal's capital markets and creating institutional investment pathways for early-stage companies lacking traditional financing access.
- • Implementation required amendments to the CIT Act, EPF Act, and contribution-based Social Security Act through the 'Ordinance to Amend Certain Nepal Acts,' initiated by President Ram Chandra Poudel.
Summary
Nepal's government has significantly liberalized investment restrictions for its state-operated pension system, marking a structural shift in how approximately Rs 902 billion in accumulated retirement savings will be deployed into capital markets. The expansion, formalized through presidential ordinance on May 6, 2026, removes decades-old investment constraints that had confined three major pension vehicles to conservative fixed-income and limited equity instruments.
The Employees Provident Fund—the largest of the three entities with Rs 500 billion under management—previously operated only its own collective investment scheme. It now gains authority to participate in external mutual funds and venture capital instruments approved by Nepal's Securities Board. The Citizens Investment Trust, which manages approximately Rs 300 billion for over 800,000 contributors, similarly expands from bank and insurance company shares into mutual funds and venture capital. The Social Security Fund, holding Rs 102 billion from 2.75 million contributors as of February 2026, gains discretion to deploy capital into private equity and mutual fund allocations.
Until this reform, the three funds operated under severe constraints: fixed deposits, government bonds, and equity stakes in hydropower companies constituted the primary investment universe. Officials characterize the mandate expansion as dual-purpose policy: generating improved risk-adjusted returns for 3.4 million+ contributors while catalyzing institutional capital availability for Nepal's startup ecosystem and emerging enterprises. The capital mobilization addresses what government sources describe as "billions of rupees currently lying idle," suggesting previous yield limitations necessitated this reallocation framework.
The ordinance mechanism—amending the CIT Act, EPF Act, and contribution-based Social Security Act—represents an executive policy acceleration that bypasses full parliamentary deliberation. This institutional structure reflects urgency around capital market development and domestic venture financing gaps. Implementation requires Securities Board approval of eligible mutual fund and venture capital fund managers, establishing gatekeeping mechanisms to manage credit and market risk concentration within pension portfolios.
The Employees Provident Fund—the largest of the three entities with Rs 500 billion under management—previously operated only its own collective investment scheme. It now gains authority to participate in external mutual funds and venture capital instruments approved by Nepal's Securities Board. The Citizens Investment Trust, which manages approximately Rs 300 billion for over 800,000 contributors, similarly expands from bank and insurance company shares into mutual funds and venture capital. The Social Security Fund, holding Rs 102 billion from 2.75 million contributors as of February 2026, gains discretion to deploy capital into private equity and mutual fund allocations.
Until this reform, the three funds operated under severe constraints: fixed deposits, government bonds, and equity stakes in hydropower companies constituted the primary investment universe. Officials characterize the mandate expansion as dual-purpose policy: generating improved risk-adjusted returns for 3.4 million+ contributors while catalyzing institutional capital availability for Nepal's startup ecosystem and emerging enterprises. The capital mobilization addresses what government sources describe as "billions of rupees currently lying idle," suggesting previous yield limitations necessitated this reallocation framework.
The ordinance mechanism—amending the CIT Act, EPF Act, and contribution-based Social Security Act—represents an executive policy acceleration that bypasses full parliamentary deliberation. This institutional structure reflects urgency around capital market development and domestic venture financing gaps. Implementation requires Securities Board approval of eligible mutual fund and venture capital fund managers, establishing gatekeeping mechanisms to manage credit and market risk concentration within pension portfolios.
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