Aditya Birla Sun Life Mutual Fund has temporarily suspended fresh investments in two of its debt schemes — Medium Term Plan and Credit Risk Fund —with effect from Friday.
The fund house said that it had made significant gains in the two schemes, which would be realised by existing investors, and hence has stopped fresh investments so that the gains are not diluted.
“We have stopped taking additional money in our credit oriented funds —Medium Term Plan and Credit Risk Fund,” the fund house said in a statement on Thursday.
“We believe that there are substantial gains in our funds which would be realised by the existing investors over the next few months. Since we do not wish to dilute this for existing investors by taking more money in these funds, we have stopped fresh subscriptions in these funds,” it added.
While the Medium Term plan is an open-ended debt scheme that invests in instruments with a maturity period between three to four years, the Credit Risk Fund predominantly invests in AA and below rated corporate bonds.
The cumulative assets under management (AUM) of the two schemes is around ₹5,000 crore.
It is believed that the move is to ensure that the incremental gains from some of the written down assets go to the existing investors while barring new investors that invest just eyeing the recent gains.
Meanwhile, the fund house’s decision will not impact existing systematic investment plans (SIPs) and systematic transfer plans (STPs). Only fresh registrations will be barred.
Incidentally, the development comes close on the heels of Franklin Templeton Mutual Fund announcing the winding up of six debt schemes with a combined AUM of ₹26,000 crore due to an illiquid market for low rated securities.
The ongoing coronavirus pandemic has significantly affected the cash flows of most corporates that, in turn, has impacted the payment capabilities especially those with a lower rating.
Further, given the bleak outlook, the market for low rated papers has become illiquid.
However, after the Franklin Templeton MF announcement, industry body Association of Mutual Funds in India (AMFI) had said that it was a one-off instance and not an industry-wide phenomenon.
