Additional 15% AUM in G-Sec, T-bills says SEBI: to offset Franklin Templeton effect


Mutual funds can now invest an additional 15 percent of AUM in G-Secs & T-Bills in corporate bonds, banking & PSU, and credit risk funds as said by SEBI to AMFI. This is because G-Secs & T-Bills are said to be a safer and more liquid form of instrument.

“SEBI said that MF to possess an additional presentation of up to fifteen percent in T-bills and G-secs in BPD (Banking and PSU Obligation Reserve), Credit, and Company Security Assets for a quarter of a year subject to trustee endorsements. We invite this measure and wish to have this choice not restricted to just the following 3 months. This move will comfort speculators on liquidity worries in the portfolio and give a pad against potential reclamation, later on, assuming any,” said Dhawal Dalal, Chief Investment Officer-Fixed Income, Edelweiss Mutual Fund.

The Debt fund offered by Franklin Templeton aims to provide optimal returns by investing in high-quality government securities. FT MF announced its decision to wind up six of its schemes—Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund, and Franklin India Income Opportunities Fund.  The closure of six debt schemes by the Franklin Templeton (FT) Mutual Fund has resulted in eroding the confidence of investors to a large extent and has created a sort of crisis of confidence in the market. These six debt schemes together have Assets Under Management (AUM) worth over Rs 28,000 crore.

SEBI has amended the plan trademark for each of the three plans. For Corporate Security Assets, SEBI said at least 65 percent of all-out resources must be in AA+ appraised papers or more evaluated papers. Before it was at 80 percent.

Also, for credit Hazard subsidizes at least 50 percent of absolute resources ought to be in AA and underneath evaluated corporate securities SEBI said.

In case of credit risk funds, earlier the minimum investment of 65% in AA and below rated paper were allowed, the objective is to generate income investing predominantly in AA and below rated corporate funds.

Earlier, the minimum investment in debt instruments of banks, PSUs, municipal bonds, and public financial institutions was 80% and now it has been reduced to 65%.

It’s better to have larger exposure to government securities as it is hard to sell corporate bonds and create cash in normal times, and in time like this crisis, it has become even more challenging. In the current structure, funds are categorized based on duration and credit risk separately. The transaction cost of G – Secs are 0.06% or Rs 6 for every Rs 10,000 invested will be charged as brokerage.


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