Markets

Two Indian funds see assets drop by half amid exit from risk

Bloomberg Mumbai | Updated on February 12, 2019

Indiabulls Asset Management and DHFL Pramerica Mutual Fund have seen their assets plunge by more than half in the December quarter. That shows fears of India's non-bank finance companies still linger.

The dwindling in assets is the most among any mutual-fund company in India during the period, data compiled by Bloomberg show.

While flows to the industry have slowed recently because of heightened market volatility and political uncertainty ahead of general elections due by May, it also suggests investors continue to shun risk months after defaults by an infrastructure lender shocked India's non-bank finance companies.

"Institutional investors have been pulling out of debt funds that hold a high exposure to papers of their NBFC parent or from schemes with high NBFC exposure," said Vidya Bala, Chennai-based head of mutual fund research at Wealth India Financial Services Pvt., which runs FundsIndia.com.

DHFL Pramerica's ultra short-term fund last month held 34 per cent of its assets in bonds sold by the troubled mortgage lender Dewan Housing Finance Corp., according to Bala. The fund saw its assets plummet from Rs 20 billion ($281 million) in August to Rs 3.6 billion in January, she said.

Dewan has been in the eye of the storm since September in the wake of defaults at Infrastructure Leasing & Financial Services Ltd.

The flight to safety following the IL&FS crisis is a transient phenomenon and the business will return to normalcy as sentiments improve, DHFL Pramerica said by email. The funds assets were skewed toward debt, leaving it vulnerable to the exit of large investors, it said.

"Indiabulls Assets institutional business recovered in January, with money in cash funds doubling from November," Associate Director Raghav Iyengar said by phone. The mutual fund held Rs 37.3 billion in assets at the year-end, according to data compiled by Bloomberg.

Dewan is in the process of selling its entire 50 per cent stake in the fund venture to partner Pramerica Financial. The funds assets totaled 107.6 billion rupees as of December 31.

Published on February 12, 2019

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