A day after capital markets regulator SEBI introduced new caps for debt mutual funds on their investment patterns, asset managers say the rules deal well enough with concentration risk, but not credit risk. The chances of the fund industry being affected by an Amtek Auto-like default again still exist.
Offers partial solution
SEBI created the new norms after the auto ancillary company Amtek Auto defaulted on ₹200 crore worth of debt that JP Morgan mutual fund had bought. At the time of the default, 15.4 per cent of the assets of the JPMorgan India Short Term Income Fund scheme was invested in Amtek Auto debt paper. In the other India Treasury Fund, 5.3 per cent of assets was invested in Amtek Auto.
The new cap for a single issuer (here, Amtek Auto) is 10 per cent of a scheme’s assets. Fund managers say the new investment caps may partly buffer the impact of another default on investor money, but doesn’t reduce the risk of the default itself.
