How allocation to bad assets increases with declining AUM
Basically, AMC has to sell good assets to meet redemption payouts and allocation to bad assets keep on increasing.
A small thread taking UTI Credit Risk Fund and underlying holding Vodafone/Idea as example #mutualfunds
In Feb’2017, the scheme bought 650 debentures of “8.04% UNSECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES. DATE OF MATURITY 27/01/2022” from secondary market.
AA+
Allocation in scheme = 2.6445%; AUM ~ 2433 cr #vodafoneidea
Scheme increased allocation in Idea in April’2017
AA+
Allocation in scheme = 3.7297%
AUM ~ 2791 Cr (increasing)
Scheme increased allocation in Idea in May’2017
AA+
Allocation in scheme = 3.8261%
AUM ~ 3109 Cr (increasing)
Next one year, scheme neither bought/sold these holdings only the allocation in the scheme due to the change in AUM.
In May’2018, the scheme additionally allocated ~ 3% of its assets to the group.
Allocation in scheme = 5.2776%
AUM ~ 4938 Cr
In July’2018, scheme allocated more and for the last time, this point onwards, all the changes in % allocation in scheme is on account of change in AUM due to redemption or markdown (other securities).
Allocation in scheme = 5.8249%
AUM ~ 5292 Cr
After the IL&FS event, active money started to flee the credit risk category. At the end of september’2018 AUM of credit risk as category was ~88.7K crore & at the end of January’2020 AUM shrink to ~61.5K Crore
Post July’2018, UTI Credit Risk Fund has not bought or sold Idea/Vodafone papers & % allocation to scheme for this group kept on rising due to shrinking of AUM.
The exposure went to 17.549% at the end of December’2019
In Jan’2020, after the supreme court event, @FTIIndia marked it down to 0 @utimutualfund marked it down partially. Now UTI has segregated the portfolio.
Always keep an eye on AUM in debt funds & single issuer risk (red flag if AUM is declining & single issuer is increasing).
Property Market is buzzing once again, and investor activity has gone up. But there are risks.
Seven Risks of buying under construction property (UCP)
Thread🧵
Do retweet to increase the reach
I am not a real estate expert, then why I am writing something on a very complex topic.
Personal finance covers everything, it includes taking care of your health, taking adequate and appropriate insurances, making budget, optimizing loans, investments, tax and estate planning. Everything.
Buying a house is a big emotional and financial decision in anyone’s life..
With effect from 01st January'2021, all the existing schemes and all schemes to be launched on or thereafter will follow the new guidelines for product labeling (Risk-o-Meter)
Sixth level of Risk added as "Very High Risk"
Old and New Proposed Riskometer in image
(Small Thread)
Risk-o-meter shall be evaluated on monthly basis & AMC shall disclose it along with portfolios on website and on AMFI website within 10 days from the close of each month
Changes shall be communicated by way of Notice cum Addendum & by way of an e-mail or SMS to unitholders.
Debt will be valued for Credit Risk, Interest Rate Risk & liquidity Risk
* credit rating of the instrument
* Interest rate risk shall be valued using Macaulay Duration of the Portfolio
* liquidity risk of the schemes based on listing status, credit rating, structure of debt inst
I have read a lot of criticism for Dynamically Managed Equity Funds.
Small Thread
Debate is asset allocation at scheme level or Asset Allocation at Client (Advisor) level.
I think, instead of choosing one, both can be a good choice.
Asset Allocation at scheme level
+pass through taxation for rebalancing
+ no exit loads for rebalancing
+ No emotions involved, model based.
+ Higher risk adjusted returns
- fixed income allocation has no mandate
Asset Allocation at Client/Advisor Level
-ve Rebalancing at market extremes, FOMO and Panic
-ve Tax implications, specially when shifting debt to equity as t<3 years at the time of debt redemption and tax arbitrage gone.
-ve Exit Load consideration
Second Order effect on Fund of Funds of @FTIIndia due to Wind Up of 6 debt schemes
An accident or an opportunity
Valuation Committee decided to provide an illiquidity discount and fair value these 6 fixed income schemes at 50% of their daily NAV, held in FoF structure.
NAVs for FoFs were marked down on 24th April'2020, just a day after the decision to wind up six schemes was taken.
Below tables highlights the single day impact on NAV in these schemes:
O/s borrowings fully repaid in Franklin India Dynamic Accrual Fund on 11 May and +ve cash balance as on 30 JUNE is 4% of net assets.
Till April’2022, it is also expected to receive another 50% of AUM (43/96) and the scheme is available at 50% discount.
small schemes in these categories should be choosen over branded Big Elephants.
Fund managers have already over diversified in those schemes, look number of securities in those schemes
Look average daily volumes of top 10 holdings and see how many days will it take to liquidate
think about impact cost.
A scheme with 500 Crore to deploy 5% of the net AUM in an underlying needs to purchase 25 crore of that stock on the other hand a scheme with 5000 crore of AUM will require 250 crore of free float.