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
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Allocation in scheme = 3.7297%
AUM ~ 2791 Cr (increasing)
Scheme increased allocation in Idea in May’2017
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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).
8️⃣ Common Mistakes you must avoid while managing your finances
Generation Z & Millennials must read this.
In personal finance avoiding big disastrous mistakes will have a very positive impact on overall financial health.
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1️⃣
Do not buy traditional insurance policies. It's a combination of insurance and investment AND none of the purpose get solved
👉 insufficient life cover
👉 sub optimal investment
keep investments and insurance separate. Do not buy these toxic policies for tax saving.
→ take term insurance for life cover, it is the only affordable vehicle which can give you adequate life cover
the traditional insurance will give life cover of 10 times the annual premium whereas term insurance can give you life cover equivalent to 1000 times of annual premium
8️⃣ things you must know about Health Insurance
Generation Z & Millennials must read this.
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First and foremost, term insurance is to cover the immediate and medium term risk of death.
Whereas, health insurance is to cover the longer term risk of falling sick. (immediate and medium term risk is also covered).
2️⃣
The purpose of Health Insurance is to cover the risk of significant cost of hospitalization so that the nest egg you are saving for long term goals doesn't get drawn into in case of hospitalization.
8️⃣ things you must know about term insurance
Generation Z & Millennials must read this.
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1️⃣
First and foremost, you need term insurance to cover the immediate term risk of loss of income due to death.
AND
You absolutely do not need term insurance for your 60s, 70s, 80s & beyond.
Inflation (6%) adjusted purchasing power of ₹ 2 Crore after 40 years = ~ 19.44 lakhs
2️⃣ 1) Suicide within first year is not covered. Death due to any other reason, in any geography is covered. 2) No Maturity Benefits - if you survive policy term, nothing for you as MB
Some of the articles on the internet talks ignorantly about other causes of deaths not covered
Property Market is buzzing once again, and investor activity has gone up. But there are risks.
Seven Risks of buying under construction property (UCP)
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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..