UTI MF makes provisions in 5 debt schemes for side-pocketing

KS Badri Narayanan Chennai | Updated on February 17, 2020 Published on February 17, 2020

Vodafone Idea downgrade by CARE triggers fund house's move

UTI Mutual Fund has decided to create segregated portfolios (side-pocket) in five debt schemes to hold the debt paper of Vodafone Idea (VIL) separately, after the telecom company’s debentures were marked down to below-investment grade.

“Pursuant to the downgrade of debt instruments of Vodafone Idea Limited to ‘BB-’ (i.e. ‘below investment grade’) by CARE Ratings Ltd on February 17, 2020, UTI Mutual Fund proposes to create a segregated portfolio in respect of debt securities of Vodafone Idea Limited in UTI Credit Risk Fund, UTI Bond Fund, UTI Regular Savings Fund, UTI Dynamic Bond Fund and UTI Medium Term Fund effective February 17, 2020, subject to approval from the Board of Trustees,” it said in a release..

As on February 14, 2020, the five debt schemes have exposures to the tune of ₹186 crore in the debt securities of Vodafone Idea. While UTI Credit Risk Fund has exposures worth ₹107.77 crore under three schemes, UTI Regular Savings Fund exposure stands at ₹50.85 crore and UTI Bond Fund ₹18.40 crore.

It may be recalled that UTI Mutual Fund had segregated its stressed investment of ₹200 crore in troubled Altico Capital India. As at September 12, 2019, UTI Credit Risk Fund had an exposure of ₹201.82 crore in the debt security of Altico Capital India, amounting to 5.85 per cent of the schemes’ assets under management.

Following IL&FS debacle, the Securities and Exchange Board of India last year had allowed debt mutual funds to adopt “side pocket” that will allow fund managers to separate their stressed assets from the portfolio.

No subscription and redemption will be allowed in the segregated portfolio of the scheme.

Investors redeeming their units will get redemption proceeds based on the NAV of the main portfolio and will continue to hold the segregated portfolio units separately, it said.

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Published on February 17, 2020
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