Credit risk funds have seen assets decline by nearly Rs 19,000 crore in April as investors rushed to redeem their money after the closure of six debt schemes by Franklin Templeton Mutual Fund, data showed. Daily assets under management (AUM) of credit risk funds on March 31 was Rs 55,182 crore, which came down to Rs 35,929 crore on April 30, the data from Association of Mutual Funds in India (Amfi) show.
Market participants say though there were outflows from the credit funds in the past few months, Franklin Templeton MF closing its six debt schemes further increased the concern of investors and there were large redemptions in the category. “If we look at the data, a large portion of money went out only after April 24, so, I think the closure of six debt schemes by Franklin Templeton MF led the fall,” said the head (fixed income) of a mid-sized fund house on condition of anonymity.
On April 23, six schemes collectively worth Rs 25,800 crore — Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund – were wound down.
The data from Amfi also show that on April 23, daily AUM of credit risk funds was Rs 48,576 crore, after which it declined by over Rs 12,600 crore. “It was a panic redemption from investors and Franklin Templeton MF was an isolated event. In the last two-three days, redemptions have slowed down,” another fund manager said.
In its release, Amfi stated that net redemptions under credit risk funds are tapering off substantially after the Reserve Bank of India’s (RBI) announcement of a special liquidity window worth Rs 50,000 crore for the MF industry.
Nilesh Shah, chairman of Amfi and MD of Kotak Mahindra Asset Management, said, “Declining trend in net redemptions from credit risk funds is a welcome development. It is indicative of investors’ comfort after RBI’s announcement of a special liquidity facility for the MF industry. Amfi will continue to work with regulators for normal functioning of the market.”