Franklin India Low Duration Fund has 64.7% of its holding in below AA rated paper, Dynamic Accrual Fund has 44.6%, Credit Risk Fund 50.2%, Short Term Income Plan 58.9%, Ultra Short Term Bond Plan 23.9% and Income Opportunities Fund 41.3%
Mumbai: Poor credit call is one the factors that led to Franklin Templeton India winding up six of its debt schemes. According to a report by B&K Securities Ltd, Franklin Templeton is the sole lender to 26 out of the 88 entities in its debt schemes’ portfolio.
According to a Mint analysis, the six debt schemes which were wound up on Thursday have high exposure to AA and below rated paper, in one scheme it is as high as 64.7%. These schemes have an Asset Under Management (AUM) of ₹25,856 crore.
For instance, Franklin India Low Duration Fund has 64.7% of its holding in below AA rated paper, Dynamic Accrual Fund has 44.6%, Credit Risk Fund 50.2%, Short Term Income Plan 58.9%, Ultra Short Term Bond Plan 23.9% and Income Opportunities Fund 41.3%.
The same is not, however, true for other funds, according to B&K.
“Overall fixed income schemes have AUM to the tune of ₹13,11,902 crore and 83% of the portfolio is invested in AAA bonds and government securities,” it said.
These six credit managed yield oriented funds have an exposure of about ₹14,000 to non banking finance companies (NBFCs). And a combined exposure of ₹23,000 crore to infrastructure and realty sector.
Some of low rated papers in Franklin Templeton’s portfolio include – Vedanta Ltd, Clix Capital Services Ltd, Five Star Ltd, indostar Capital, DLF.
Among NBFCs, it has some of the largest exposure to papers of Piramal Capital – 100% of their mutual fund borrowing came from Franklin Funds, Shriram Transport – 34.91%, JM Financial Credit Solutions – 61%, Indostar Capital, Edelweiss, , Birla Group Holdings, Ess Kay Fincorp – 90%.
Some of the lesser known names in the portfolio of these schemes include Xander Finance, OPJ Trading, Molagavalli Renewable among others.
Afraid of a contagion affect and that it could lead to higher redemption pressures in income and credit risk funds of other Asset Management Companies (AMCs) many fund houses sent statements to investors assuring them their money is safe.
A Balasubramanian, MD and CEO of Aditya Birla Sun life Mutual Fund said “that they have zero borrowing across their schemes and that less than 1% of their debt assets are invested in AA- or below rated paper”.
HDFC Mutual Fund said its HDFC Credit Risk Debt Fund (HCRDF) has a well-diversified portfolio with investments spread across more than 65 issuers and over 30 business groups. 83% of its portfolio consists of PSU Banks Additional Tier I (AT1) securities and other AA- and above rated exposures.
ICICI Mutual Fund said it remains cognizant of managing the liquidity, concentration, credit and duration in their fixed income schemes to provide investor with better risk adjusted returns.