Flows into debt funds have been hit after Franklin Templeton Mutual Fund decided to shut down six of its schemes. Data from Association of Mutual Funds in India (Amfi) show that daily assets under management (AUM) of debt funds in March end were Rs 6.10 lakh crore, which came down to Rs 5.92 lakh crore on April 30 — a fall of around Rs 18,000 crore.
According to fund managers, investors have exited low-duration funds. The daily AUM of such funds stood at Rs 74,709.11 crore in April, compared with `80,377.59 crore in March — declining Rs 5,668.48 crore.
“Investors have exited the low-duration funds where schemes were holding lower-rated papers,” head-fixed income at Tata Asset Management Murthy Nagarajan said.
Low-duration funds invest in debt and money market instruments such that the Macaulay duration of the portfolio is between 6 and 12 months.
On the other hand, debt categories such as banking and PSU funds and gilt funds saw daily AUM increase in April.
“Both these categories of funds have delivered positive returns in the last one year and there is no credit concern.
This could be one of the reasons why they have seen surge in assets,” CIO-fixed income at Mirae Asset Investment Managers (India) Mahendra Kumar Jajoo said.
Data from Value Research show banking and PSU funds and gilt funds delivered returns of 10.70% and 15.01%, respectively, in the last one year.
The fall in assets of debt funds is largely due to the credit risk funds where assets are down by around Rs 19,361.90 crore in April, compared with March. Market participants say in the past few months, credit profile of Indian corporates started deteriorating due to the lockdown. Winding up of six debt schemes by Franklin Templeton aggravated the matter.
“There were some redemptions going on in the credit funds in the past few months. But towards the month end when we saw a fund house closing its six schemes, redemptions escalated across other debt categories,” Nagarajan said.
Apart from credit risk funds, medium-duration, short-duration, low-duration and floater funds also witnessed a fall in their assets in April.