The medium-term fund, having an asset size of Rs 34 crore, has 37.41 per cent of its assets exposed to DHFL's debt paper and 47.28 per cent exposed to Indiabulls Housing Finance. The fund also has seen more than 90 per cent fall in its asset size since September — from Rs 437 crore at August-end to Rs 34 crore. As of August, the scheme's exposure to DHFL and Indiabulls was 9 per cent and 5.7 per cent.
The MF industry has been facing mark-to-market hit on its exposure to DHFL as the non-banking financial company has been seeing a spate of downgrades since the IL&FS crisis.
To deal with concentrated exposure in its schemes, DHFL MF has decided to merge the floating rate fund into the ultra-short term fund and the medium-term fund into the credit risk fund.
The fund house has given an exit-load free window to investors to leave these schemes between May 24 and June 22. If the investors in the larger scheme decide to stay, they would get exposed to debt holdings of the smaller scheme as a proportion of the merged scheme.
“The unitholders of the larger scheme could opt to exit. They are getting a bit more exposed to debt papers, which most market participants are wary of,” said Amol Joshi, founder, Plan Rupee Investment Services, a Mumbai-based advisor.
The fall in asset size of these schemes has also led to passive breaches of the exposure limits laid down by the Securities and Exchange Board of India (Sebi). According to Sebi norms, an MF scheme cannot actively invest more than 12 per cent of its assets to a single issuer.
Besides the above scheme mergers, DHFL MF announced creating the option of the segregated portfolio in two of its fixed maturity plans — fixed duration fund (series AH) and fixed duration fund (series AP).
In December last year, Sebi had allowed the creation of segregated portfolio in debt schemes to deal with papers downgraded to below-investment grade.