The drop in NAVs of most of the fixed-maturity plans (FMPs) of these fund houses was sharper than the open-end schemes holding Altico’s debt papers. Of the 13 FMPs, 12 saw their NAVs fall between 4 per cent and 8 per cent. “FMPs typically have more concentrated exposures, as the asset-size of these close-end schemes tend to be smaller. So, the impact on NAVs from a credit event can be higher,” said a fund manager.
However, as the maturities of these close-end FMPs are a long time away, the impact on investors may not be immediate. Five of the six FMPs belonging to UTI MF are maturing in 2021, while one is set to mature in 2020, showed the data from Value Research. In the case of RNam, all its seven FMPs will be maturing in 2022. Overall, these 13 FMPs had exposure of Rs 186 crore to Altico’s debt papers, with the median exposure of these schemes at 9.6 per cent of scheme assets. Among the open-end schemes, RNam’s Ultra Short Duration Scheme is currently in the middle of its load-free exit window for investors, which is a mandatory requirement before a scheme can avail the side-pocket mechanism. On Friday, the scheme’s NAV fell 3.96 per cent.
After completion of the 30-day load-free exit window on September 24, the scheme will side-pocket the affected Altico exposure in a separate portfolio. Effective September 13, the scheme has suspended fresh subscriptions, so that recovery of Altico’s credit quality only benefits the existing investors on the day of the credit event. As of August-end, the scheme had a combined Rs 150 crore of exposure (4.6 per cent of scheme assets) to two of Altico’s corporate bonds, with one of these maturing on September 26, 2019.
UTI MF’s Credit Risk Fund saw its NAV drop 5.7 per cent. On Friday, the fund house said it would immediately create a side-pocket to hold the affected Altico’s debt papers in a separate portfolio. The side-pocket would mean the original NAV of the scheme would get split to the extent of the affected exposure. Originally, the scheme had Rs 200 crore of exposure (5.69 per cent of scheme assets) to Altico’s debt papers. On Friday, India Ratings & Research had downgraded the bank loan of Altico to ‘D’. The non-convertible debenture of the company was downgraded to ‘C’ grade. On Thursday, CARE Ratings had downgraded the proposed debentures of Altico from ‘AA-’ to ‘B’, i.e., below investment grade.