JP Morgan MF assets fell Rs 1,900 cr in Aug

Two schemes, one in which redemption was restricted due to the Amtek Auto paper and another liquid fund, see big fall in AUM; more fallout possible

The Amtek Auto debt paper, where CARE suspended its ratings early last month, seems to have taken a toll on JPMorgan Mutual Fund's assets under management.

Investors redeemed as much as Rs 1,959 crore from JPMorgan MF in August. The fund house’s assets stood at Rs 12,221 crore, down from Rs 14,021 crore in July, a fall of 12.8 per cent. Inflows into the fund house were Rs 72 crore, a net outflow of Rs 1,800 core.

According to Value Researh, a Delhi-based MF research agency, the fall in assets under management (AUM) were in two of their biggest schemes, JPMorgan India Liquid Fund and JPMorgan India Treasury Fund.

The latter scheme has been embroiled in controversy, since the fund house declared that its portfolio entailed papers of Amtek Auto which had been downgraded by rating agency CARE. This scheme’s fall in AUM was Rs 822 crore (Rs 2,534 crore in July). This prompted the fund house on August 28 to restrict redemptions in the two schemes to one per cent a day of AUM.

However, another of its liquid schemes, JPMorgan India Liquid Fund, in which redemption was allowed, took a hit of Rs 1,083 crore. Interestingly, the other scheme which holds Amtek Auto papers – JP Morgan Short Term Income Fund – saw a rise in assets by Rs 26.4 crore.

According to those in the sector, there has been pressure on the fund house since it declared that it held papers of Amtek Auto. “Distributors were faced with a lot of calls from investors who wanted to know whether the fund house was in trouble,” said one.

When Amtek Auto’s paper was issued earlier this year, it was rated 'AA' by CARE. In early August, CARE suspended ratings on the auto ancillary company's debt, as it did not furnish the information required to monitor it. Amtek made a statement on August that it was facing a “temporary cash flow mismatch".

LOSING ASSETS	Assets	Assets	Change in Assets
Scheme	Jul-15	Aug-15
JP Morgan India Liquid Fund - Retail Plan	3438.13	2354.50	-1083.63
JP Morgan India Treasury Fund - Retail Plan	2534.06	1711.93	-822.14
JP Morgan JF Greater China Equity Off-shore Fund	94.81	77.89	-16.92
JP Morgan JF ASEAN Equity Off-shore Fund	129.27	114.06	-15.21
JP Morgan India Top 100 Fund - Regular Plan	200.91	186.59	-14.33

These schemes, with a collective size of Rs 2,964 crore in July, had a total exposure of Rs 200 crore in Amtek Auto. Of this, the Short Term Income Fund held 15 per cent and India Treasury Fund held five per cent of their assets in this paper. Following the imbroglio, the management waived the fund management fees for these two schemes. Those in the sector say that usually the management fees for such schemes are 20-30 basis points.

Usually, companies and high net worth individuals park short-term money in these instruments that can give them higher returns than banks and, at the same time, liquidity. Sectoral players say the fund house’s decision to restrict redemption hasn’t been seen in a good light by investors. Said a fund's chief executive: “There is talk of selective redemption being allowed by the fund house before it decided to restrict this.” According to reports, several leading companies have shown their displeasure to the fund house and are mulling legal action.