In order to protect the interest of investors during the Covid-19 crisis, Aditya Birla Sun Life Private Limited, trustee to Aditya Birla Sun Life Mutual Fund announces temporary suspension on acceptance of fresh subscription or switch-in application to Aditya Birla Sun Life medium-term plan and ABSL credit risk fund from May 22, 2020, until further notice.
New entrants into SIP, CSIP and STP not accepted until further notice
Also, no fresh registrations under Systematic Investment Plan (SIP), Century SIP, and Systematic Transfer Plan (STP) of mutual funds will be accepted from the above-mentioned date.
However, for instalments due under SIP, CSIP and STP, registered prior to the effective date will be processed under the respective plans or options for the scheme. All other features and terms and conditions of the scheme will continue to remain unchanged.
This move by Aditya Birla Sun Life comes after Franklin Templeton closed six of its debt funds last month, citing lack of liquidity in the bond markets and redemption pressures.
Why are new registrations into Aditya Birla MF debt schemes banned?
It could perhaps be an attempt to stop speculators from entering the market at this point in time such that original investors benefit from the recovery in bad debt.
Except for a few AAA names and government bonds, other segments of the bond market are facing a liquidity crunch. Considering investment opportunities in the bond markets have almost dried up for instruments rated below AAA, the fund house is aiming at recovering as much as it can from its underlying securities.
An official spokesperson for Aditya Birla Sun Life MF was quoted saying, "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 in these funds."
Aditya Birla Sun Life Medium-term plan is an open-ended medium-term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 to 4 years, and Aditya Birla Sun Life Credit Risk Fund is an open-ended debt scheme predominantly investing in AA and below rated corporate bonds.
According to data released by the Association of Mutual Funds in India, the medium-term bond funds saw a net outflow of Rs 6,363 crore and credit risk funds saw net outflows of Rs 19,238 crore in April 2020.