AMFI Reassures Investors About Debt Mutual Funds

Following the announcement of winding up of six credit risk fixed income schemes by one of the asset management companies (AMC), Association of Mutual Funds in India (AMFI), the mutual fund industry body has assured investors that majority of Fixed Income Mutual Funds AUM is invested in superior credit quality securities and schemes have appropriate liquidity to ensure normal operations. AMFI strongly recommends that investors continue to focus on their investment goals, consult their financial advisor and not get side-tracked by an isolated event in a few schemes of one fund company.

The action taken by the particular AMC is limited to the six specific credit risk fixed income schemes managed by the said AMC due to the illiquidity of their portfolios. The assets under management (AUM) of these six schemes constitute less than 1.4% of the Indian Mutual Fund Industry's aggregate AUM as on March 31, 2020. Fixed income schemes of most mutual funds have superior credit quality as confirmed by ratings of independent credit rating agencies and continue to remain fairly liquid even in these challenging times.

SEBI regulations allow mutual funds schemes to borrow up to 20% of their assets to meet liquidity needs for redemption / dividend pay-out. While AMFI is in the process of collecting the data, many Mutual funds have informed that they don't have any outstanding borrowing. Liquidity, Maturity profile and Credit quality for Debt Funds is appropriate for day to day operations to continue uninterruptedly. AMFI expects fixed income funds across entire Mutual Fund Industry to continue their normal operation without any material impact.

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