Aditya Birla SL bars fresh inflows in two debt funds; but no restrictions on redemptions

Aditya Birla Sun Life Mutual Fund has temporarily suspended fresh subscriptions and switch-in applications in Aditya Birla Sun Life Medium Term Plan (ABMTP) and Aditya Birla Sun Life Credit Risk Fund (ACRF). The fund house has suspended new investments in these schemes from  May 22, 2020. Redemptions from these funds, though, will be allowed, as usual.

Prior commitments to be accepted

Though the fund house suspended inflows in these schemes, all investments through systematic investment and transfer plans, and century SIPs registered before May 22, 2020, will be accepted.  Investors cannot enrol for any fresh systematic investment transactions in these schemes.

The AMC has stated that it has taken this step to protect the interests of investors. “We believe that there are substantial gains in our funds, which would be realised by the existing investors over the next few months. Since we do not wish to dilute this for existing investors by taking more money in these funds, we have stopped fresh subscriptions,” says A Balasubramanian, Managing Director & Chief Executive Officer, Birla Sun Life AMC.

ABMTP’s  assets under management fell to Rs 2400 crore as on April 30, 2020 from Rs 3957 crore as on March 31, 2020. ACRF’s AUM declined to Rs 2576 crore from Rs 4644 crore over same period. Redemption pressure has exerted pressure on many debt funds across AMCs, including the schemes mentioned earlier. As the fund house aims to recover as much as it can from its underlying securities, it pays to stop inflows as investment opportunities in the bond markets have more or less dried up for instruments rated below AAA. ACRF has investments in AA and below rated bonds predominantly. ABTMP lost 8.48 per cent, whereas ACRF gave 0.59 per cent returns, over the past one year.

After Franklin Templeton shut six credit-risk-oriented funds, investors in debt schemes panicked and selling pressure prevailed. In April 2020, credit risk funds as a category saw net outflows of Rs 19238 crore, whereas medium term bond funds saw a net outflow of Rs 6363 crore, according to data release by the Association of Mutual Funds in India.