MFs check inter-scheme transfers
The internal compliance teams of some mutual fund houses have asked their fund managers to curb interscheme asset transfers, which is often adopted as a recourse to meet shortterm liquidity constraints.
By Shailesh Menon, TNN |
MUMBAI: The internal compliance teams of some mutual fund houses have asked their fund managers to curb interscheme asset transfers, which is often adopted as a recourse to meet shortterm liquidity constraints. The move comes in the wake of several fund houses cutting questionable asset transfer deals during October and November, when debt schemes (particularly fixed maturity plans ��� FMPs) witnessed unprecedented redemption pressures.
While it is not illegal for mutual fund houses to transfer assets (or to put it plainly, sell papers to another schemes) to other schemes of longer maturity terms or higher liquidity, the transfers have to be done at fair market yields. Industry sources claim there have been instances where the schemes which received the assets, were short changed or saddled with dud paper.
���Inter-scheme transfers are fine if the assets transferred are good papers. Mostly, such swaps are done into a cluster of longterm schemes (where there are no redemption pressures) or a few large funds,��� said Crisil Fund Services head Krishnan Sitaraman. ���For sure, funds would have resorted to inter-scheme asset transfers in October to meet redemption pressures ; but not entirely due real estate papers. Only 5% of the overall mutual fund portfolio had exposure to real estate papers; though some funds had realty exposure as high as 40 to 50%,��� Mr Sitaraman added.
According to industry sources, the internal audit team of a foreign bank promoted mutual fund has put a blanket ban on inter-scheme asset transfers to meet shortfalls. The fund house is said to have done a large number of interscheme asset swaps to meet redemption pressure. Huge exposure to debt papers of real estate companies had scared many corporate investors into prematurely redeeming their investments from many of the fund house���s schemes.
While it is not illegal for mutual fund houses to transfer assets (or to put it plainly, sell papers to another schemes) to other schemes of longer maturity terms or higher liquidity, the transfers have to be done at fair market yields. Industry sources claim there have been instances where the schemes which received the assets, were short changed or saddled with dud paper.
���Inter-scheme transfers are fine if the assets transferred are good papers. Mostly, such swaps are done into a cluster of longterm schemes (where there are no redemption pressures) or a few large funds,��� said Crisil Fund Services head Krishnan Sitaraman. ���For sure, funds would have resorted to inter-scheme asset transfers in October to meet redemption pressures ; but not entirely due real estate papers. Only 5% of the overall mutual fund portfolio had exposure to real estate papers; though some funds had realty exposure as high as 40 to 50%,��� Mr Sitaraman added.
According to industry sources, the internal audit team of a foreign bank promoted mutual fund has put a blanket ban on inter-scheme asset transfers to meet shortfalls. The fund house is said to have done a large number of interscheme asset swaps to meet redemption pressure. Huge exposure to debt papers of real estate companies had scared many corporate investors into prematurely redeeming their investments from many of the fund house���s schemes.
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