UTI Mutual Fund Friday said it plans to create a separate portfolio—UTI Credit Risk Fund—segregated from its main holding, following the downgrade of debt instruments of Altico Capital India, a lender to real estate companies.
However, the decision is subject to the approval from Board of Trustees, UTI Mutual Fund said in a statement.
The move will help prevent the distressed assets from damaging the returns generated from more liquid and better-performing assets.
“Pursuant to downgrade of debt instruments of Altico Capital India Ltd to 'B' i.e. 'below investment grade' by CARE Ratings Ltd., UTI Mutual Fund proposes to create segregated portfolio in respect of Altico Capital India Ltd. in UTI Credit Risk Fund effective from Sept. 13, 2019 subject to approval from Board of Trustees,” the fund house said.
Till Thursday, UTI Credit Risk Fund has an exposure of Rs 201.82 crore, amounting to 5.85 percent of assets under management, in debt security of Altico Capital.
Upon recovery of money from Altico Capital in the segregated portfolio, whether partial or full, it will be distributed to the investors in proportion to their holding in the segregated portfolio.
“Existing investors in the scheme, as on the day of creation of segregated portfolio, shall be allotted equal number of units in the segregated portfolio as held in the main portfolio,” the fund house said.
“A statement of account indicating the units held by the investors in the segregated portfolio along with the net asset value of both segregated portfolio and the main portfolio as on the day of the credit event shall be communicated to the investors within five working days of creation of the segregated portfolio,” it added.
UTI Mutual Fund is one of the leading players with investor accounts of over 1 crore under its 182 schemes as on Aug. 31, 2019.
In December last year, the Securities and Exchange Board of India had permitted mutual funds to create segregated portfolios with respect to debt and money market instruments.
In case of a credit event that is a credit downgrade like below investment grade and similar, segregated portfolio may be created.
Creation of segregated portfolios is a mechanism to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
