Birla MF stops inflows in 2 debt funds, no ban on redemptions

MUMBAI: Aditya Birla Sun Life MF has stopped taking money in two of its debt schemes — Medium Term Plan and Credit Risk Fund. But the fund house said that regular redemptions and switch to other funds will continue as usual. It said the decision, which has been taken to safeguard the interests of existing investors, is effective May 22.
Together, the two debt schemes currently manage about Rs 5,000 crore. The fund house has already informed its investors about its decision to suspend inflows. Both the funds had exposure to debt papers of IL&FS companies, which were written down, and also of Essel Group, which were recovered.
“We believe that there are substantial gains in our funds, which would be realised by the existing investors over next few months. Since we do not wish to dilute this for existing investors by taking more money in these funds, we have stopped fresh subscriptions,” a spokesperson for Birla MF said. Systematic investment plans (SIPs) and systematic transfer plans (STPs) registered till May 21 will continue, but no new SIPs and STPs will be registered.
A Birla MF executive explained that this decision has been taken to keep ‘opportunistic’ investors away from making quick gains by investing in these funds now. Suppose some investors enter these schemes now and the two schemes make recoveries in some of the investments that had turned bad, then the net asset value (NAV) of the funds could jump, bringing in gains.
“We are expecting recovery in some of our assets…we did not want opportunistic money to benefit at the cost of current investors,” the fund house said. However, such gains may not be immediate for existing investors since “…resolutions on these stressed assets may start yielding results over six-18 months,” it added.