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Notwithstanding the series of defaults by corporates last year and more recently Vodafone Idea, ICICI Prudential Mutual Fund has managed to attract investment in debt schemes and regain the top slot.
ICICI Pru MF, which has not seen a single default or delayed payment of interest in any of its schemes, has managed to push its overall debt fund (excluding liquid and overnight) market share to 15.6 per cent last December from 13.8 per cent in December, 2018.
ICICI Pru MF debt fund AUM jumped 33 per cent to top the industry at ₹1.24-lakh crore (₹93,164 crore) in the last one year while that of HDFC MF and Aditya Birla MF were at ₹1.08-lakh crore (91,570 crore) and ₹1.06-lakh crore (₹94,325 crore).
SBI MF with an AUM of ₹82,754 crore toppled Nippon India MF (formerly Reliance MF) for the fourth slot and Kotak MF captured the fifth position with an AUM of ₹68,670 crore (₹52,530 crore).
The assets under debt fund of the mutual fund industry jumped 18 per cent in the last one year to ₹7.92-lakh crore (₹6.72-lakh crore) as of last December.
Write-down blues
The age-old belief that debt funds are safer than equity was shattered with some of the mutual funds such as Franklin Templeton, UTI, Aditya Birla and Nippon India taking write-downs on their investments in Vodafone Idea, resulting in huge losses to investors.
The worry for mutual funds increased after the Supreme Court rejected the review petition filed by telecom companies seeking a review of its judgment on Adjusted Gross Revenue dues which entails an outgo of over ₹1-lakh crore for the industry. Vodafone Idea alone had to pay ₹55,000 crore.
As of December-end, mutual funds had a combined exposure of ₹3,390 crore to Vodafone Idea.
In fact, debt investors of mutual fund have been at the receiving end since 2018 with a series of defaults starting with DHFL and IL&FS.
Nimesh Shah, Managing Director & CEO of ICICI Pru MF, recently said the fund house’s decision to keep credit risk management separate from fund management almost 10 years ago helped protect its investors’ money from defaults.
Many of the other MFs had higher yield-to-maturities (YTM) than ICICI MF debt schemes, but it believed in not chasing higher yields, he said.
Independent financial advisor Joydeep Sen of Wise Investors said ICICI MF is well diversified on both the assets and liability sides.
For instance, in their credit risk fund portfolio, their investment is spread across 85 securities, making per security dependence of about 1.15 per cent. Hence, even if there are any incidents, the diversification helps would protect the downside, he said.
Similarly, they have an investor concentration limit of ₹50 crore, which ensures that no single large investor can influence the investment or redemption movement.
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