IL&FS crisis: HFCs with weak liquidity to face heat as MFs on high-alert

Rising redemption pressure complicates the situation for debt fund managers

The downgrade of IL&FS paper from double A plus to junk status in a matter of a few days has created a panic-like situation among debt fund managers and is making them take pre-emptive action against possible risks in their portfolios.

The debt schemes are also staring at redemption from large corporate investors; resulting in money managers shoring up cash levels through asset sales.

According to the head of fixed-income of a large-sized fund house, fund managers are concerned that the liquidity tightness created by the IL&FS crisis can have a wider impact.

“There is a systemic colour to this event.