Higher volatility in the debt market, following the Reserve Bank's liquidity tightening measures to contain rupee's freefall, has adversely affected the schemes under the National Pension System, a report said.
"With over 85 per cent allocation to corporate bonds and government securities and an average maturity of over 10 years, the central and state schemes, which manage most of the NPS corpus, took a heavy beating," investment and mutual fund research provider Morningstar said in a report.
According to the report, in 2012, the Central government (CG) and the state government (SG) schemes delivered double digit returns.
Equities (E), Corporate Bond (C) and Government Bond (G) schemes also delivered double digit returns with equity portfolios delivering an average return of nearly 30 per cent in the previous year.
RBI's various liquidity tightening measures to curb the rupee depreciation, has put bond yields under pressure, therefore "driving down returns" so far this year, the report said.
Furthermore, the unexpected hike in the repo rate in the recent monetary policy review has once again "added to the pressure", and further "dampened sentiments" in the fixed income markets, the report said.
"The central and state government schemes have lost 4.72 per cent and 5.13 per cent respectively, on an average, over the last three months," the report said.
The average year to date return for Scheme CG and Scheme SG stood at 0.29 per cent and 0.24 per cent, respectively, at the end of September 27, 2013.
"SBI pension fund, which was sitting on an average maturity of around 14 years for Scheme SG & CG at the end of June 2013, was the worst hit by this volatility," the report said.
According to data compiled by Morningstar, SBI pension fund's return stood at (-) 5.58 per cent in the last three months for the central goverment scheme. The corresponding return for UTI was (-) 4.50 per cent and (-4.07 pc) for LIC.
Performance of E class scheme has been middling, albeit better than government employee schemes, so far this year, the report added.
Average year to date return of Scheme E has been around one per cent, and returns over the past three years are flattish, or in the red, the report said.
The report said the C class option, which invests primarily in corporate bonds has been the best performer of the lot.
"Although the recent turmoil in fixed income markets has eaten into returns, it has still managed to deliver an average return of 3.1 per cent so far this year, and an average return of 9 per cent (annualised) over the past three years," Morningstar report said.
The G class scheme, which invests in government securities, has been the worst hit so far this year, the report said.