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It was reported that corporate bond holdings in the domestic investment trust industry have been almost stagnant over the past five years. business standard.
Managed by an actively managed bond fund INRAs of the end of April 2019, assets were $6.73 billion. Last month, their wealth increased by 9%, INR7.3 trillion.
This comes amid a doubling of assets under management (AUM) across the industry during this period, according to data from the Association of Mutual Funds of India (Amfi).
AUM includes assets of term plans and Bharat Bond ETFs and excludes overnight, liquidity, money market and gilt funds.
However, the AUM of corporate bond-focused MF schemes does not accurately reflect investors’ aversion to corporate bonds. Many of these schemes also invest in government securities (g-secs), state development loans (SDLs), and short-term financial instruments, which continue to receive preferential treatment.
Securities and Exchange Board of India (Sebi) Commissioner Ananth Narayan said at an event earlier this week that the decline in participation was mainly due to a loss of investor confidence in the wake of the IL&FS crisis, and that capital He said it was having a negative impact on the formation.
“We lost five years of capital formation in the bond market because people lost faith in the ecosystem,” he said.
Impact on corporate bond investment
Fund managers’ recent preference for sovereign bonds is also having an impact on MFs’ corporate bond investments.
G-secs remain the go-to option for durations above five years, a trend highlighted by the low spread between G-secs and corporate bonds until recently.
“Our g-sec position is primarily driven by our belief that yields are bound to fall. Therefore, we prefer adding documents with longer maturities to the fund. We find that G-secs are our preferred route as corporate bonds are scarce and illiquid. Additionally, we believe the yield curve decline is driven by increased demand for G-secs. , g-secs become profitable again,” said Sandeep Yadav, Senior Vice President, Principal Fixed Income, DSP Mutual Funds.
Most dynamic bond funds, the most actively managed bond funds, have seen their G-sec percentage increase over the past few years. For example, Kotak MF’s Dynamic Bond Fund now has 64% exposure to G-secs, compared to 63% as of December 2021. Fund houses like Nippon India and Bandhan run dynamic bond funds exclusively in G-secs.
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Published: January 27, 2024, 3:41 PM IST
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