Discover and read the best of Twitter Threads about #CreditRiskFund
Most recents (7)
MisterBond's #RollofHonour in #Debt schemes as on January 2023 (based on past 12 monthly ranking analysis)
Only difference instead of last 7 year data (in Equity), we collate data over 5 year period and do daily 36 month (vs 60 month in Equity) #RollingReturns analysis:
Only difference instead of last 7 year data (in Equity), we collate data over 5 year period and do daily 36 month (vs 60 month in Equity) #RollingReturns analysis:
8 questions to ask before you invest in a Credit Fund.
Q1) How much yield should the fund offer?
A) The principle of 'higher-the-better' does not apply to credit funds. Higher yields come with disproportionately higher risks. Funds offering 11%+ are a clear avoid. Thread 1/8
Q1) How much yield should the fund offer?
A) The principle of 'higher-the-better' does not apply to credit funds. Higher yields come with disproportionately higher risks. Funds offering 11%+ are a clear avoid. Thread 1/8
Q2) How diversified is the fund?
A) A fund with higher diversification is less risky. As per regulations, exposure in a company cannot exceed 10%. Well managed funds cap exposure in one company to 5% or lower. Lower exposure means lower hit on return if an accident happens. 2/8
A) A fund with higher diversification is less risky. As per regulations, exposure in a company cannot exceed 10%. Well managed funds cap exposure in one company to 5% or lower. Lower exposure means lower hit on return if an accident happens. 2/8
Q3) Does the fund have high exit loads?
A) Usually exit loads ensure that investors allow fund managers time to execute strategies. However, very high exit loads often result in debt-traps restricting investors' exit even when there are glaring mistakes made by fund-managers. 3/8
A) Usually exit loads ensure that investors allow fund managers time to execute strategies. However, very high exit loads often result in debt-traps restricting investors' exit even when there are glaring mistakes made by fund-managers. 3/8
The Yes Bank scare for Mutual Funds (MFs)
Some MFs have significant exposure to subordinated/ perpetual bonds of Yes Bank. These MFs stare at huge valuation losses if the credit rating of these bonds is cut below investment grade. Thread (1/9)
Some MFs have significant exposure to subordinated/ perpetual bonds of Yes Bank. These MFs stare at huge valuation losses if the credit rating of these bonds is cut below investment grade. Thread (1/9)
The following MFs have major exposure to Basel II/ Basel III, subordinated/ perpetual bonds of Yes Bank (market value as at 31st July, 2019) -
a) Reliance Nippon ~ Rs. 2150 Cr.
b) Franklin Templeton ~ Rs. 540 Cr.
c) UTI ~ Rs. 445 Cr.
d) Kotak ~ Rs.115 Cr.
2/9
a) Reliance Nippon ~ Rs. 2150 Cr.
b) Franklin Templeton ~ Rs. 540 Cr.
c) UTI ~ Rs. 445 Cr.
d) Kotak ~ Rs.115 Cr.
2/9
The Credit Rating of Yes Bank Basel III Perpetual (Tier I or AT1) bonds have been downgraded thrice by ICRA in a span of 9 months.
a) Nov 24, 2018 - downgraded to AA- from AA.
b) May 03, 2019 - downgraded to A from AA-.
c) July 24, 2019 - downgraded to BBB from A.
3/9
a) Nov 24, 2018 - downgraded to AA- from AA.
b) May 03, 2019 - downgraded to A from AA-.
c) July 24, 2019 - downgraded to BBB from A.
3/9
I am revisiting the topic of Public Issue of Non-Convertible Debentures (NCDs) covered a couple of days back. Only this time, I am focusing on Subordinated (Tier II) NCDs that are slipped in (sometimes slyly) along with senior secured NCDs of NBFCs. Thread (1/9)
Refer to the picture, below (the pic is representative only). A subordinated NCD (circled in red) appears as one of the many maturity options. A naive investor may think that it is similar to other NCDs on offer, just that it has a longer maturity. (2/9) 
What many investors are unaware of is the fact that subordinated NCDs are paid after senior NCD holders in-case the company goes into liquidation i.e. subscribers to option I to VIII NCDs, in the pic above, would be paid before payments are made to option IX to XI NCDs. (3/9)
Here is a list of lemons (troubled assets) held by debt schemes of various Mutual Funds -
Qualification - at least 3 lemons post Aug 2018
1. BoI AXA - 6
a) Sintex
b) DHFL
c) Kwality
d) ILFS
e) Coffee Day
f) Avantha Holdings
Thread (1/10)
Qualification - at least 3 lemons post Aug 2018
1. BoI AXA - 6
a) Sintex
b) DHFL
c) Kwality
d) ILFS
e) Coffee Day
f) Avantha Holdings
Thread (1/10)
2. Reliance Nippon - 6
a) ZEE LAS
b) DHFL
c) Morgan Credit (Yes Bank promoter)
d) Reliance Commercial Finance (ADAG)
e) Reliance Home Finance (ADAG)
f) Avantha Realty
(2/10)
a) ZEE LAS
b) DHFL
c) Morgan Credit (Yes Bank promoter)
d) Reliance Commercial Finance (ADAG)
e) Reliance Home Finance (ADAG)
f) Avantha Realty
(2/10)
3. Birla Sunlife - 5
a) ZEE LAS
b) Wadhawan Global (DHFL Promoter)
c) ILFS Tamil Nadu Power
d) Jharkhand Road Project (ILFS)
e) ILFS Education
(3/10)
a) ZEE LAS
b) Wadhawan Global (DHFL Promoter)
c) ILFS Tamil Nadu Power
d) Jharkhand Road Project (ILFS)
e) ILFS Education
(3/10)
Day 2 on Twitter. Coming to the next set of awards - The "Foot in Mouth" Awards. A clear winner in this category is DSP Mutual Fund. I have shortlisted them for their sheer cockiness. Thread. (1/10)
In September, 2018, the Fund House triggered a panic by selling DHFL bonds at distressed levels. It was a business call; and hence a benefit of doubt could be given. (2/10)
What cannot be forgiven though, is the brazenness with which the Fund house eulogised their portfolio selection capabilities. 3/10
Alright! Here I am, making my debut on Twitter. To mark the occasion, I am handing out the "Lemon of the Year" Award to one of the worst performing Debt Mutual Funds.
A clear winner in this category, by a mile, is BoI AXA Credit Risk Fund. Thread (1/9)
A clear winner in this category, by a mile, is BoI AXA Credit Risk Fund. Thread (1/9)
The fund has achieved a rare feat of burning almost 90% of its AUM within a span of last 11 months i.e. the AUM contracted from ~1700 Cr in Aug 2018 to ~200 Cr in Jul 2019.
The one year return is a whopping minus 48%. 2/9
The one year return is a whopping minus 48%. 2/9
The Fund Managers successfully caught all the lemons that fate threw at them viz DHFL, IL&FS, Kwality, Sintex, Cox & Kings, Coffee Day etc. 3/9
