MUMBAI: Late on Sunday, Aditya Birla Sun Life MF decided to change the valuation of some of its bond holdings in its debt funds. The fund house took the decision so that the new values are in conformity with valuations suggested by two agencies, Crisil and ICRA. The name of the schemes or the securities in which the valuations were realigned could not be confirmed.
Earlier on Saturday, BoI AXA MF, a joint venture between PSU-lender Bank of India and AXA, one of the world’s largest financial groups, marked down some of its investments in three of its schemes — Credit Risk Fund, Conservative Hybrid Fund and Short Term Income Fund.
According to sources, Birla MF had some papers of Jharkhand government and their valuations were realigned. A Birla MF executive said “it was not a hair cut”, meaning the value of the security has not been marked down. “It was a valuation alignment to the external agency, but that asset is standard asset and awaiting for the final InvIT structure to sell... it is a servicing debt,” the executive said.
The valuation change was needed due to some delay in closing the InvIT structure and, hence, the fund house aligned to the suggested valuation, the executive said. Sources also said that the decision by the fund house was aimed at mitigating some risks in the scheme after the recent winding down decision by Franklin Templeton MF arising due to the Coronavirus pandemic-induced uncertainties. The papers are expected to be soon sold to a long-term investment institution.
In the case of BoI AXA MF, after the markdown, the net asset value (NAV) of the Credit Risk Fund fell by a massive 50% to Rs 3.65 as of close of business on April 24 from Rs 7.34 on April 23, data from the AMFI website showed. In comparison, the NAV of Short Term Income Fund went down by nearly 9.5% to Rs 16.17, while that of Conservative Hybrid Fund was down 1.6% to Rs 18.7.
Markdown for a scheme is a process through which a part of the value of one or more of its holdings are reduced to reflect a more realistic valuation. For example, if a bond worth Rs 100 is marked down 50%, its value in the books of the scheme would become Rs 50.
“Considering the severe illiquidity in the debt market, it is 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. Hence, (the fund house) has revalued the illiquid and/or thinly traded securities across the portfolios,” the fund house noted.
The marked-down investments within these three schemes include those in bonds of Dewan Housing Finance, Avantha Holdings, Coffee Day Natural Resources and Amantha Healthcare, an investor update from the fund house noted.
According to a spokesperson of the fund house, one of the main reasons for this decision was to protect the interest of all the investors in the current volatile situation. Due to heavy redemptions in recent weeks, combined with extremely low liquidity in the bond market, it was felt that those who will exit will do so at the cost of those who will remain invested. To protect the interest of those investors who remained in the scheme, the fund house decided to mark down the investments, the spokesperson said.
Earlier on Saturday, BoI AXA MF, a joint venture between PSU-lender Bank of India and AXA, one of the world’s largest financial groups, marked down some of its investments in three of its schemes — Credit Risk Fund, Conservative Hybrid Fund and Short Term Income Fund.
According to sources, Birla MF had some papers of Jharkhand government and their valuations were realigned. A Birla MF executive said “it was not a hair cut”, meaning the value of the security has not been marked down. “It was a valuation alignment to the external agency, but that asset is standard asset and awaiting for the final InvIT structure to sell... it is a servicing debt,” the executive said.
The valuation change was needed due to some delay in closing the InvIT structure and, hence, the fund house aligned to the suggested valuation, the executive said. Sources also said that the decision by the fund house was aimed at mitigating some risks in the scheme after the recent winding down decision by Franklin Templeton MF arising due to the Coronavirus pandemic-induced uncertainties. The papers are expected to be soon sold to a long-term investment institution.
In the case of BoI AXA MF, after the markdown, the net asset value (NAV) of the Credit Risk Fund fell by a massive 50% to Rs 3.65 as of close of business on April 24 from Rs 7.34 on April 23, data from the AMFI website showed. In comparison, the NAV of Short Term Income Fund went down by nearly 9.5% to Rs 16.17, while that of Conservative Hybrid Fund was down 1.6% to Rs 18.7.
Markdown for a scheme is a process through which a part of the value of one or more of its holdings are reduced to reflect a more realistic valuation. For example, if a bond worth Rs 100 is marked down 50%, its value in the books of the scheme would become Rs 50.
“Considering the severe illiquidity in the debt market, it is 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. Hence, (the fund house) has revalued the illiquid and/or thinly traded securities across the portfolios,” the fund house noted.
The marked-down investments within these three schemes include those in bonds of Dewan Housing Finance, Avantha Holdings, Coffee Day Natural Resources and Amantha Healthcare, an investor update from the fund house noted.
According to a spokesperson of the fund house, one of the main reasons for this decision was to protect the interest of all the investors in the current volatile situation. Due to heavy redemptions in recent weeks, combined with extremely low liquidity in the bond market, it was felt that those who will exit will do so at the cost of those who will remain invested. To protect the interest of those investors who remained in the scheme, the fund house decided to mark down the investments, the spokesperson said.
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