If you’re an investor in debt mutual funds, you’re probably puzzling over the reports on ‘side-pocketing’ of bonds that figure in fund portfolios.
If you’re confused by what all this means to you, here are your questions answered.
When debt funds face a downgrade or default on a bond they own, they write down its value in the net asset value (NAV). So why is there a need for side pocketing?
When debt funds write down the value of a bond, they usually aren’t sure if the bond is a complete dud or will realise some value later. But in the interests of conservatism, SEBI rules require funds to write down the value of such bonds by 25, 50, 75 or even 100 percent in their portfolios, based on their credit ratings. When a fund takes such write downs, it takes an immediate blow to its NAV. But if the issuer of the bond later pays up his/her dues, the fund will then have to increase its NAV to account for the repayment. In such cases, for investors in the scheme who exit early, taking NAV losses would fail to benefit from the recovery.
Denne historien er fra September 23, 2019-utgaven av The Hindu Business Line.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra September 23, 2019-utgaven av The Hindu Business Line.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
Covid Presents An Opportunity For India
India must attract investors exiting China post-Covid. Streamlining of project clearances and relaxation in FRBM norms will help
Did Alternative Assets Shield You From Covid-19 Volatility?
The assets closely linked to stock and debt markets could not stave off the losses
How To Put Aircraft To Bed
Preserving grounded planes, to get them up and flying at short notice, is a challenging task. Ashwini Phadnis captures the process
There Can Be No Going Back On WFH
Covid-19 has fast-forwarded the shift to ‘work from home’. However, some face-to-face connect will always be needed
UN, WHO Urged To Ensure ‘Benefit Sharing' Of Covid-Related Data
Biopharma firms should reach vaccines, medicines to poor nations at an affordable price, say civil society bodies
With No Clear Signal From Rlys, States Explore Ways To Bring Back Migrants
Quarantine centres, cross-country buses being arranged even as migrants hop on to boats, trucks and ambulances
Centre Allows All Neighbourhood Shops To Open But With Riders
Final call will be taken by local authorities; shopping complexes that draw fewer ‘outsiders’ are permitted to operate
Covid Impact Relatively Muted In India
Compared to Italy and the US, India’s rate of infection spread has been slow. This can be attributed to the strict measures in place
How Global Trade Will Fare Post-Covid
China isn’t likely to lose its pre-eminent position soon. India, for one, will need to make manufacturing globally competitive
How To Curb Harassment In The Virtual Office
Training and sensitisation are essential. Institute a strict dress code and chat etiquette to ensure professionalism during video calls