No cause for panic; most investments are AAA: Fund Managers

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Markets witnessed bloodbath for the second consecutive day on sub-prime woes. However, fund managers assured that they are not facing any redemption pressures, and believe that time and again these kinds of events will affect the sentiments of the market and will in turn present opportunities to enter the market systematically.

Another question that can trouble the investor is the quality of the papers that the mutual fund Fixed Maturity Plans (FMPs) and other debt funds have been investing in. Will these go the subprime way?

Funds assured that most of their investments are in AAA rated instruments. 'AAA' ratings are defined as denoting "the lowest expectation of credit risk", further defined as an "exceptionally strong capacity for payment of financial commitments."

Sandesh Kirkire, CEO, Kotak Mahindra Mutual Fund stated that most of Kotak MF's investments are AAA rated. Rajiv Anand, Head - Investments, Standard Chartered Mutual Fund too assured the same as he said, "Almost entire portfolio of FMPs from Standard Chartered MF are invested in CP, CD and Bonds which are AAA or P1+ rated instruments. These instruments have a low level probability of loss, which is less than 1%."

Commenting on the markets, Anand told moneycontrol.com, "The growth momentum of the Indian economy has not been impacted in any manner. We are just getting a fare share of the global volatility, however, if problems continue, implications for India can be severe." Kirkire said, "We will have to wait for global cues to know that to what extent it will impact flows."

• 'Subprime' woes - What should investors do?

So, how long will this subprime mortgage problem take to play out and die? Paras Adenwala, CIO of ING Investment Management says, "Until the time we get the magnitude of the problem, it is very hard to really put a timeframe to it. I will put it this way that whenever there are excesses in the market, you see an excuse for a correction to happen. It could be a subprime, it could be a yen carry trade or it could be anything else. So it is nothing but a normal correction, which is correcting excesses in the market.

- Reena Prince

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