[K_Drive]

Originally Posted by ghodlur

As a precaution I have started registering the SIP for 2 yrs as against earlier mindset of 1 yr. Unfortunately for me the SIP registration dates have been different and used to track them in Excel file.

I normally set maximum available terms for SIP. Normally it will be more than 25yrs. When you need money, then you certainly know when you have to stop SIP and redeem it. So why take chances.

[ece2k2]

Guys, any idea what this means for investors - https://www.moneycontrol.com/news/bu...y-5183701.html

[SmartCat]

Originally Posted by ece2k2

Guys, any idea what this means for investors - https://www.moneycontrol.com/news/bu...y-5183701.html

Essentially, all these funds have been converted into FMP (fixed maturity plan) type mutual fund.

- No further investment allowed
- No withdrawals
- NAVs will be published daily as usual

However, unlike FMPs, nobody (including Franklin Templeton) knows when investors will get back their money. Fund managers will try to exit the bonds they hold as soon as it starts trading and the price is right. Or else they might decide to hold some bonds till maturity.

So investors can either expect to get small percentage of capital invested with interest periodically (likely) or get lumpsum amount after a few years (less likely). Big worry is the quality and credit-worthiness of bonds they hold in the portfolio.

[ece2k2]

Originally Posted by SmartCat

Essentially, all these funds have been converted into FMP (fixed maturity plan) type mutual fund.

- No further investment allowed
- No withdrawals
- NAVs will be published daily as usual

However, unlike FMPs, nobody (including Franlin Templeton) knows when investors will get back their money. Fund managers will try to exit the bonds they hold as soon as it starts trading and the price is right. Or else they might decide to hold some bonds till maturity.

So investors can either expect to get small percentage of capital invested periodically (likely) or get lumpsum amount after a few years (less likely).

Thank you, it looks like I must forget about my investments with Franklin Templeton for now.

Is there a possibility for other AMCs to be hit as well? I don’t want to end up putting all my other investments (duration funds and credit risk funds) at risk and thinking about redeeming them. I could probably park them in overnight funds. Please let me know if that would make sense at this point of time.

[saket77]

Originally Posted by ece2k2

Guys, any idea what this means for investors - https://www.moneycontrol.com/news/bu...y-5183701.html

Official release from Franklin:

[SmartCat]

Originally Posted by ece2k2

Is there a possibility for other AMCs to be hit as well? I don’t want to end up putting all my other investments (duration funds and credit risk funds) at risk and thinking about redeeming them. I could probably park them in overnight funds. Please let me know if that would make sense at this point of time.

This is likely to have cascading effect because many investors in corporate bond funds will be thinking exactly like you. I expect lots of investors to redeem their units. Now, this can have negative consequences for those who DON'T sell their units.

Because, when the fund house gets redemption requests, the fund manager will sell off AAA rated bonds because only those will have enough liquidity. Investors who DON'T sell will be left with lower rated high risk bonds.

Since your funds are already stuck with Franklin Templeton, it makes sense to sell your other corporate bond funds and move to overnight or g-sec funds.

[ece2k2]

Originally Posted by SmartCat

This is likely to have cascading effect because many investors in corporate bond funds will be thinking exactly like you. I expect lots of investors to redeem their units. Now, this can have negative consequences for those who DON'T sell their units.

Because, when the fund house gets redemption requests, the fund manager will sell off AAA rated bonds because only those will have enough liquidity. Investors who DON'T sell will be left with lower rated high risk bonds.

Since your funds are already stuck with Franklin Templeton, it makes sense to sell your other corporate bond funds and move to overnight or g-sec funds.

A quick question: I was wondering if I should retain my investments in liquid funds with SBI MF. Please let me know if it has exposure to corporate bonds. Thanks!

[SmartCat]

Originally Posted by ece2k2

A quick question: I was wondering if I should retain my investments in liquid funds with SBI MF. Please let me know if it has exposure to corporate bonds. Thanks!

If you have doubts about any debt mutual fund, just look at its portfolio on valueresearchonline. For eg: SBI liquid fund
https://www.valueresearchonline.com/...i-liquid-fund/

This bar graph gives you an idea about portfolio quality. 35% of funds are in SOV (sovereign treasury bills - 100% risk free). Remaining is in A+ category (high quality, but nobody trusts those ratings anymore)



In valueresearchonline, look at the portfolio for unknown names:



All the names in the list are well known publicly listed banks and corporates with decent financials. National Bank Agr Rur Devp is NABARD, so no issues there (5.26% holding). The only unknown candidate in the portfolio is NABHA POWER. A quick Google search reveals that it is a power company owned and operated by Larsen & Toubro. Although the plant is not operational, credit risk is low because of its parentage.

However, this is not the entire portfolio. Around 30% of the portfolio is hidden from public glare. We don't know the quality of these securities. However, going by the quality of 70% of the portfolio, we can conclude that this is a pretty safe liquid fund.

[spookey]

Originally Posted by SmartCat

If you have doubts about any debt mutual fund, just look at its portfolio on valueresearchonline.

Hi Smartcat, I have parked a part my fathers retirement fund in these funds after doing a due diligence as suggested by you on valueresearchonline but would still like to know your opinion if i should redeem any of these as i can't take any chances in such crucial times.
1) ABSL Low duration fund.
2) ABSL Money manager fund
3)ICICI Pru savings fund
4) IDFC Bond fund - medium term ( has given best returns so far!)
5) IDFC Low duration fund

Thanks & Regards.

[SmartCat]

Originally Posted by spookey

Hi Smartcat, I have parked a part my fathers retirement fund in these funds after doing a due diligence as suggested by you on valueresearchonline but would still like to know your opinion if i should redeem any of these as i can't take any chances in such crucial times.

wow, that is lot of homework you have given me! Instead of me checking each fund, let us know if you found anything interesting after doing the due diligence.

When it comes to investments - When it doubt, Get out!. Move into safer funds, especially since things could get worse.

But remember that if there is panic on the streets and many investors exit on Friday, lots of debt funds will show a significant fall in NAVs on Monday. Once the panic subsides, NAVs might recover later. So if you decide to exit, move funds slowly over a period of time is better.

[JediKnight]

Originally Posted by ece2k2

Guys, any idea what this means for investors - https://www.moneycontrol.com/news/bu...y-5183701.html

I believe this has never happened in Indian history before. I was an investor in one of the schemes. And that too a big percentage of my portfolio. But i redeemed a few days back. I thank my stars.

I am wondering if this is a warning sign of things to come. Is there an invisible rot in the Indian economy. Even before COVID-19 we had bank closures and AAA companies defaulting. COVID-19 may be the proverbial straw that broke the camel's back.

Where should the retail investor look now. Debt funds are loosing credibility, equity has already wiped out 5 years gains and will probably go on to wipe out a decade , real estate likely to crash, heck even keeping your money in bank is not safe.

[ece2k2]

Originally Posted by JediKnight

I believe this has never happened in Indian history before. I was an investor in one of the schemes. And that too a big percentage of my portfolio. But i redeemed a few days back. I thank my stars.

I am wondering if this is a warning sign of things to come. Is there an invisible rot in the Indian economy. Even before COVID-19 we had bank closures and AAA companies defaulting. COVID-19 may be the proverbial straw that broke the camel's back.

Where should the retail investor look now. Debt funds are loosing credibility, equity has already wiped out 5 years gains and will probably go on to wipe out a decade , real estate likely to crash, heck even keeping your money in bank is not safe.

Lucky you. I still have 10% of my portfolio with Franklin


I am going to exit the duration/savings funds and move my money to Gilt funds, Government bonds and overnight funds as hopefully these must be the last to default. I am still trusting liquid funds and dynamic bond funds for now.

[graaja]

Originally Posted by SmartCat

This is likely to have cascading effect because many investors in corporate bond funds will be thinking exactly like you. I expect lots of investors to redeem their units. Now, this can have negative consequences for those who DON'T sell their units.

Because, when the fund house gets redemption requests, the fund manager will sell off AAA rated bonds because only those will have enough liquidity. Investors who DON'T sell will be left with lower rated high risk bonds.

Since your funds are already stuck with Franklin Templeton, it makes sense to sell your other corporate bond funds and move to overnight or g-sec funds.

I had switched most of my duration fund holdings to Gilt and Banking & PSU funds. There is still a small portion remaining in some low duration funds. I am planning to switch them as well to Gilt funds.

What could be the effect of this situation on Banking and PSU funds? As these hold almost all of their holdings in AAA and GSecs, are these safe for now? Or should I switch out from these to overnight funds?

[hothatchaway]

Originally Posted by graaja

What could be the effect of this situation on Banking and PSU funds? As these hold almost all of their holdings in AAA and GSecs, are these safe for now? Or should I switch out from these to overnight funds?

More than the quality of the underlying securities, it is the redemption pressure that the funds are facing, forcing them to dump their holdings, starting with the quality ones as they are the easiest to sell. PSU bond funds should be "safer" since institutions are unlikely to park their liquid money in these.

On a separate note, not surprised that Franklin ultra short bond is in the list. It's portfolio has been high risk for a while now and the fund itself was targeted towards institutions. Hope not many retail investors had their money still parked in it.

Some of the basic rules of thumb for debt mutual funds are to check the quality of the underlying securities ie those that invest in sovereign debt and bonds issued by reputed corporates. Stay with funds that have a "largish" AUM. While Gilt funds may offer capital protection they still carry interest rate risk. High probability of interest rates dipping further negatively affecting existing bonds.

[adithya.kp]

Moneycontrol gives complete holding for any fund. Of course the fact sheet on respective fund house website will have it.

Smartcat,
I read somewhere in the net. (The author was not sure). He was saying fund houses can/may use the money in overnight fund to fund the redemption. Do you see that a possibility? As you know ,the fund houses can borrow only up to 20% of the scheme for redemption.

Originally Posted by SmartCat

If you have doubts about any debt mutual fund, just look at its portfolio on valueresearchonline. For eg: SBI liquid fund
https://www.valueresearchonline.com/...i-liquid-fund/....