Fallout from Amtek Auto and JSPL issues dents sentiment; total AUM shrinks more than 9% in just 7 months
Mumbai: Investors have moved away from credit funds in the past few months after the fears surrounding Amtek and Jindal Steel and Power (JSPL) issues created panic in the market.
THE SILVER LININGS
Informedinvestors,whocanunderstand and analyse the risk, will now come back.”
Amtek default fears started spooking investors since August, but the company later repaid part of its dues, even though there was a delay. Jindal Steel and Power have fully repaid their investors. Some mutual fund investors in those papers havealreadyincurredlossesasthey rushed to exit their investments.
In the past one year, credit funds have returned 8.91% on an average, while the sensitive index Sensex lost 6.5% during the same period. The average yearly returns were at 9.21% in the past three years, according to Morningstar.
“Withyieldsdipping,thissegment (credit funds) is likely to offer attractive investment opportunities in the next couple of years,” said Lakshmi Iyer, chief investment officer (debt), Kotak Mutual Fund. “But, you need to be aware of the risk elements. Currently, such portfolios are having gross yields of around 2% — higher than any gilt or other bond funds.”
F r a nkl i n I ndi a , Rel i a nc e, ICICI Prudential, Kotak Birla, L&T, DSP BlackRock are some of the fund houses that run those credit schemes. Two fund schemes, DHFL Pramerica Credit Opportunity and BarodaPioneerCreditOpportunity, have delivered the best returns, according to Morningstar data. They yielded 10.38% and 10.11% (annualised as on April 190) respectively.
“Notwithstanding the recent concerns on credit environment, we will see flows coming back into credit funds,” said Amit Tripathi, head of fixed income at Reliance Mutual Fund.