The AUM of credit risk funds sees a 26% drop in a week

Mumbai: In just a week after Franklin Templeton's decision to close six of its funds by the end of April 23, all funds, the high-risk schemes at the center of the crisis, together saw a rupee of 12.569 billion rupees or almost 26% slips into its total assets under management ( AUM ).

From managing Rs 48,576 crore on April 30, AUM of 20 credit risk funds fell to Rs 36,008 crore by April 30, latest data from industry body Amfi He showed. Part of this drop could be attributed to falling asset prices, but the majority was due to investor redemptions, industry players said.

The silver lining, however, is that the pace of redemptions from credit risk funds abated substantially after the RBI on April 27 opened a special funding window for fund houses, Amfi officials said. According to RBI data, in three days since the Special Liquidity Facility for Mutual Funds (SLF-MF) started, banks borrowed Rs 6,000 crore through this scheme. Under the rules, fund houses are to borrow from SLF-MF through banks.

According to an Amfi release, as of April 24, net redemptions, that is redemptions net of funds mobilized by all the credit risk funds in the industry, was Rs 2,949 crore, which peaked at Rs 4,294 crore on April 27. It was on that day the RBI announced SLF-MF, a Rs 50,000-crore, 90-day borrowing window for fund houses.

Thereafter, during the last three days, i.e. from April 28 to April 30, the net redemptions of these funds decreased steadily by Rs 1,847 crore, Rs 1,251 crore and Rs 794 crore, respectively, according to an AMFI statement. All mutual funds have met amortizations in the normal course of business, he said.

The declining trend in net redemptions from credit risk funds is indicative of investors comfort from RBI’s special liquidity facility available to MFs industry, said Nilesh Shah, chairman, Amfi. The MF industry trade body continues to work with the regulators for normal functioning of the market, he said.