“Unlisted securities are witnessing even higher pressure due to illiquidity, as the Securities and Exchange Board of India (Sebi) wants MFs to reduce participation in this segment in a phased manner,” said a fund manager.
However, advisors say investors need to stay patient with these schemes.
“While these are credit-oriented schemes, the payout will happen sooner or later, as all the portfolio investee companies are unlikely to face payment risks,” said Srikanth Matrubai, chief executive officer of SriKavi Wealth.
Retirees are often attracted to high-yielding debt schemes, where they can use systematic withdrawal plans, or SWPs, to take out money monthly.
“The Franklin episode should serve as a wake-up call to investors to avoid investing in schemes that take exposure to high credit-risk investments,” said Vidya Bala, co-founder of PrimeInvestor.
“Given the liquidity risks in such schemes, using them for monthly income generation through SWPs may not be a
feasible option,” she added.
Meanwhile, the timeline of the recovery can also get impacted if corporates or other portfolio investee companies seek to reschedule their maturities.
Sebi has relaxed its default valuation norms for corporates in light of the slowdown in economic activity amid the coronavirus pandemic.
As part of the relaxations, any rescheduling or extending of maturing on bonds may not be categorised as default if it is done for the coronavirus-related lockdown or the moratorium extended by the RBI to borrowers of non-banking financial companies.