Do not exit debt funds hit by IL&FS events as resolution may happen soon

Fund houses still haven't used the side-pocketing option

 

The Infrastructure Leasing & Financial Services (IL&FS) issue has resurfaced, and hit the net asset values (NAVs) of debt funds of three leading fund houses: Aditya Birla Sun Life (ABSL), HDFC and UTI. Mutual fund experts, however, say investors who have the requisite risk appetite should not exit these funds, as there is a good chance for payments to resume soon.  

First, let us understand what has happened. The three fund houses mentioned above had invested in debt papers issued by three special purpose vehicles (SPVs) of the IL&FS group. These SPVs are cash flow generating entities,