, 23 tweets, 12 min read Read on Twitter
Thread on the @KotakMF #FMP saga; Attn: @IndiaSebi

Highlight is on an #AMC which, in an FMP, considers it #prudent to reduce the risk, of an asset, by accepting a riskier asset as #security; knowing, the first asset shall mature with the FMP, giving no time to act if defaulted.
We reserve further comment. We shall just answer few questions raised by #investors.

1. FMP has a #fixedhorizon, at the end of which investors expect their money back. Also, they expect not to lose money. Knowing these expectations, who decided to launch the FMP?
Ans:Kotak AMC
2. A high #yield #portfolio may be made in many ways. Risk can be protected by structuring deal in many ways. Who made a portfolio of high #coupon/yield (11%) #debt instruments by lending upto 40% to #borrowers against security of their companies #equity #shares?
Ans: Kotak AMC
3. #Prudent policy requires a well diversified portfolio (say, 30-35 bonds with each having a ~3% weightage) to reduces #risk. Who decided to create a very #Concentrated portfolio of 10-14 high yield (risk) bonds, each having a weightage of about 8-10%?
Ans: Kotak AMC
4. Who offered/sold/ marketed the schemes to the investors? Note: Whether they marketed it transparently explaining the risky nature (explaining the intention to deploy money in high risk instruments secured with #pledge against shares) or not is the question here.
Ans:Kotak AMC
5. Who earned a #FEES (IMF) for managing the scheme professionally & ensuring receipts of income of the portfolio for the last 3 years? Note: What should the scope of that “managing” be given that the portfolio is high risky/concentrated is not the question here.
Ans:Kotak AMC
6. There are significantly high number of #companies #borrowing money from #mutualfunds, especially in the high risk #fixedincome securities space. Out of that universe of debt instruments, who decided to lend money to That Group?
Ans: Kotak AMC
7. Who assessed that lending to That Group is significantly risky, and, to cover that risk, decided to get shares as security?
Ans: Kotak AMC

8. Instead of lending a prudent amount, say ~3%, which reduces risk, who decided to lend~10% each to two group companies?
Ans. Kotak AMC
9. Substantial selling of shares leads to fall in value is well known. It’s also known that, by maturity, a 3 year 11% ZCB becomes 1.37 times the principal. Inspite of knowing this, who decided that a cover of 1.5, or whatever, times the lent money is ADEQUATE?
Ans: Kotak AMC
10. Who is, now, claiming that while the borrower is not in the position to repay as contracted, we can’t sell the pledged shares, as it would not be sufficient to receive the principal lent and interest accrued there on?
Ans : Kotak AMC
11. Who was supposed to explain, in the offer document of FMP, the risk factors related to lending via such risky instruments structured by taking security in the form of shares, but did not explain?
Ans: Kotak AMC
12. Who was supposed to explain, in the offer document of FMP, the risk factors related to situations where the maturity of the scheme may be extended, or part payment may be given, thereby preparing investors for such eventuality, but did not explain?
Ans: Kotak AMC
13. Which expert was supposed to understand that the purpose of security, in the form of shares, is NOT just to make the portfolio look better in the books, but to ensure efficient recovery in case of default, so that the scheme can be closed in time?
Ans: Kotak AMC
14. Who seems to be surprised, realising, that, on default, it’s almost impossible to recover money as sale of pledged security results in a loss in market value of shares, beyond their imagination, and, thus, the pledge seems INADEQUATE or, rather, MEANINGLESS?
Ans: Kotak AMC
15. Who realised, at least 6-8 weeks prior to the maturity of FMP, that they would not be able to get a SIGNIFICANT amount of money back from the borrower by the FMP maturity, yet, did not communicate the same to investors who are the risk takers of the scheme?
Ans: Kotak AMC
16. Given that this is an FMP, which is traded on stock exchanges like @NSEIndia @BSEIndia on prices based on NAV, who is responsible to ensure fairness of the correct value of assets, and ensure that the NAV is calculated as per prudent @theicai accounting norms?
Ans: Kotak AMC
17. Inspite of knowing that FMPs may be linked to investors goals, who decided to extend the bonds repayment date, much after the FMP maturity, without asking (if not necessarily seeking permission, atleast to assess the pulse), the actual lenders - the investors?
Ans: Kotak AMC
18. Who assumes that money shall be repaid by the borrower in the next six months, but does not try to explain the rationale of that assumption, nor clarifies how would the money be recovered or how the pledged shares be sold then, if again defaulted on new date.
Ans: Kotak AMC
19. Who was not supposed to have acted quietly & #arbitrarily, and give explanations, if any, only on media platforms, instead of releasing a proper #communication for the investors, to begin with, elaborating the SEBI rules under which such acts were taken?
Ans: Kotak AMC
20. Who, on one hand, claims that investors have not lost money as yet, and, on other hand, wants, and expects, the investors to ignore #timevalue of money and believe that this is just a loss of #return and not loss of #PRINCIPAL?
Ans: Kotak AMC
21. Who, instead of accepting #responsibility with humility, is trying to make this a special circumstance beyond the control of mankind?
Ans: Kotak AMC

22. Who seems to be spreading the #narrative that it was all in the interest of investors?
Ans: Kotak AMC
23. Who wants the investors to consider this as “Risk of FMP” and not “professional #negligence”?
Ans: Kotak AMC

24. Who is assuming that all “investors” of the FMP are happy with the current events, and only the non-investors are raising unnecessary #issues?
Ans: Kotak AMC
25. Who is suffering, is sitting clueless & helpless, is not sure if @IndiaSebi #regulations have been followed, is not sure if things just went wrong or there was professional negligence, and given the reasons, is wondering how would he get money in future as well?
Ans: Investor
Missing some Tweet in this thread?
You can try to force a refresh.

Like this thread? Get email updates or save it to PDF!

Subscribe to Mutual Funds Guide
Profile picture

Get real-time email alerts when new unrolls are available from this author!

This content may be removed anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Follow Us on Twitter!

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just three indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3.00/month or $30.00/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!