Medium duration, which is another credit-oriented category, has also continued to see a decline in asset base. As of May 29, AUM of the medium-duration category stood at Rs 19,893.95 crore, indicating a fall of
Rs 1,457.54 crore from the April-end number.
Compared to January-end (AUM of Rs 30,439.71 crore), the AUM for the category as of May 29 is down 34.64 per cent.
“Investor panic towards credit-oriented schemes is understandable as the economy came to a standstill. There is no clarity as to how it will restart, and once it restarts, whether it re-lapses. Also, we have seen that redressing cases of bad credits can be a long-drawn one for MFs,” said Dhirendra Kumar, chief executive officer of Value Research.
Experts add the Franklin Templeton episode has had a spillover effect on credit-oriented categories. “Investors
don’t want to take any chances with their capital in the current environment,” said a mutual fund research analyst.
On April 23, Franklin Templeton MF had announced winding up of six of its yield-oriented schemes with AUM of Rs 24,753.28 crore. This doesn’t include the value of the funds’ exposure in the segregated portfolios, where it has exposure to debt papers of Vodafone Idea and YES Bank. The industry data indicates that investors
are looking at safer alternatives within the debt segment. Banking & PSU debt funds and corporate bond funds have seen their AUM grow 7.9 per cent and 6.27 per cent, respectively, between April-end and May 29.
Corporate bonds invest 80 per cent of the scheme corpus to AA-plus and above-rated papers. According to recent relaxations given by the Securities and Exchange Board of India (Sebi), this requirement has been eased to 65 per cent, allowing such schemes to ensure liquidity with higher exposure to
government securities and treasury bills.
Banking & PSU debt funds invest 80 per cent of their scheme corpus to debt instruments of banks, public sector undertakings, public financial institutions, and municipal bonds. Recently, Sebi
had reduced the requirement to 65 per cent, so that such funds can invest more in assets that enhance portfolio liquidity.