Credit risk fund outflows surge to Rs 19,239 crore in April, Franklin Templeton crisis adds to panic

Credit risk funds have seen an outflow of Rs 19,238.98 crore in April as redemption pressure and worsening liquidity issues took a toll. The shutdown of six debt schemes by Franklin Templeton India added to the panic.

The outflows from these funds stood at Rs 5,568.8 crore in the month of March.

Franklin Templeton Mutual Fund shut six of its schemes - including Credit Risk Fund. The funds of Franklin Templeton MF aggregating more than Rs 25,000 crore are said to have bitten the dust because of liquidity crunch.

Credit risk funds are debt funds that invest roughly 65 percent of the investment corpus in less than AA-rated paper. As the risk related to investing in a lower-rated paper is higher, the returns on these papers are also high.

Credit risk funds delivered negative 4.44 percent average returns last month, according to a May 4 report by Value Research, a mutual fund research firm.

Fund managers said the credit risk fund category has been reeling under the stress of redemptions as most of the fund houses had their underlying assets deployed in highly illiquid corporate bonds.