The net asset values of three BOI AXA debt schemes—BOI AXA Credit Risk Fund, BOI AXA Conservative Hybrid Fund and BOI AXA Short-Term Income Fund—fell between 2 percent and 50 percent on Friday after the fund house said it will mark down its exposure in select debt securities held in its portfolio.
This comes on the heels of Franklin Templeton Mutual Fund winding up six yield-oriented, managed credit funds from April 23 citing “severe market dislocation and illiquidity” caused by the Covid-19 pandemic.
“Considering the severe illiquidity in the debt market, it's estimated that the securities in the portfolio may not be reflecting the realisable value that should form the basis of valuation of NAV of the funds where these securities are held,” the fund house said in a statement. “Hence, the Valuation Committee of BOI AXA Investment Managers on April 24, 2020, has revalued the illiquid and/or thinly traded securities across the portfolios.”
The markdown, which comes into effect on April 24, has wiped out all gains for investors over the 1-year and 3-year periods.
“Many investors didn't actually have the risk tolerance for investing in credit risk funds or funds that belonged to other such categories where the fund was taking exposure to lower rates securities,” said Shalini Dhawan, co-founder and director, Plan Ahead Wealth Advisors. “In case the investor has the risk tolerance, they can stay invested, else for investors with lower risk tolerance or need of funds, an exit may be prudent.”
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