Aditya
Birla Sun Life Mutual Fund Suspends Fresh Subscription in Credit Risk, Medium
Term Debt Schemes
Aditya
Birla Sun Life (ABSL) Mutual fund announced that it has temporarily stopped
accepting fresh subscriptions and switch-in applications in two of its debt
schemes.
The
two schemes are Aditya Birla Sun Life Medium Term Plan and Aditya Birla Sun
Life Credit Risk. The suspension in fresh subscriptions will be effective from
22 May, 2020.
Further,
the fund house also stated that it will not accept any fresh registrations
under the systematic transactions viz. systematic investment plans (SIPs),
Century SIP (CSIP) and systematic transfer plan (STP).
However,
instalments falling due under SIP/CSIP/STP registered prior to the effective
date will continue to be processed under the respective plans/options of the
scheme, the fund house said in a circular to its unit holders.
Aditya
Birla Sun Life Medium Term Plan is an open-ended medium term debt scheme
investing in debt papers with Macaulay duration between 3-4 years. The scheme
has given poor returns due to multiple write offs in the past one year. The
one-year return of the scheme was -8.48%.
Aditya
Birla Sun Life Credit Risk is an open-ended debt scheme predominantly investing
in AA and below rated corporate bonds. The scheme has delivered poor returns in
the past six months due to write offs of some of the debt papers in the
portfolio. The one year return of the scheme has been 0.59% and three-year
return was 4.22%.
Credit
risk debt schemes faced large scale redemptions in April , 2020 after Franklin
Templeton India Mutual Fund (FTIMF) shut down six of its credit risk based debt
schemes.
The
shutdown was as an effect of the high exposure of the schemes to low credit
quality, illiquid debt. The high credit risk profile of the schemes could not
work in the current stressed economic scenario, where indebted companies are
finding it difficult to meet loan obligations or raise funds.
Due
to this, investors in the credit risk schemes took the exit and moved to safer
assets. Credit risk schemes witnessed a net outflow of Rs. 19,239 crore in the
previous month. The total assets under management (AUM) in credit risk schemes
at the beginning of April was Rs. 55,380 crore. This means 35% of the assets in
the schemes took the exit.
Other
debt scheme categories which had exposure to low rated debt papers were also
affected and saw high redemptions. The next worst hit category was low duration
funds and medium term funds with net outflow of Rs. 6,841 crore and Rs. 6,363
crore, respectively.
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