 "JP Morgan AMC lifts redemption curbs on troubled schemes")
JPMorgan Asset Management on Monday lifted the one per cent redemption cap on its two schemes with exposure to Amtek Auto debentures.
The move comes after the fund house obtained unit holders’ approval to hive off the toxic assets. Amtek had run into a liquidity problem and defaulted on payment to bond holders.
The two schemes saw heavy redemption pressure from investors after nearly one month of ‘gating’. Sources said investors queued to liquidate their investments in JPMorgan’s India Treasury Fund and the India Short Term Income Fund.
A source pegged the redemption amount at not less than Rs 1,000 crore. The amount couldn’t be verified with the fund house.
“Redemptions in the two schemes had virtually halted since the Amtek crisis broke about a month ago. Many investors rushed to redeem as soon as the gating was removed,” said a source. Queries to JPMorgan AMC remained unanswered.
The fund house on Sunday announced it had got the unit holders' nod to the proposal to segregate assets exposed to Amtek Auto debentures from other assets of the schemes. The two schemes have nearly 2,600 holders.
JPMorgan on Monday stated two separate net asset values (NAVs) each for the India Treasury Fund and India Short Term Income Fund. It had earlier said investments by both schemes other than Amtek were “highly liquid”.
Before the Amtek crisis, the assets under management (AUM) of the two schemes were nearly Rs 3,000 crore, at end-July. By the end of August, the AUM for these two fell to Rs 2,100 crore. If the reports of redemption are true, the fund house could be left with less than Rs 1,000 crore of AUM under these two schemes.
JPMorgan had to reduce the valuation of these two schemes after rating agencies downgraded the non-convertible debentures (NCDs) of Amtek Auto. India Treasury Fund and India Short Term Income Fund had invested around Rs 190 crore in the NCDs, which had offered a coupon rate of 10.25 per cent.
The Rs 2,534-crore India Treasury Fund had allocated 5.29 per cent (or Rs 134 crore) of assets to Amtek Auto's issuance papers. The Rs 430-crore India Short Term Income Fund infused 15.37 per cent (or Rs 66 crore) in the same instrument in July.
Last week, Amtek Auto defaulted on the payment to NCD holders, including JPMorgan. The company and bondholders are said to be negotiating the repayment options.JP Morgan had said gating was instituted to protect the interests of all unit holders and to ensure equal and fair treatment.
Some in the sector had expressed displeasure, saying the fund house should have let investors take out their investments at a loss if they wished to.
The Amtek episode and concerns over credit quality in the system have spooked debt mutual fund investors.
Liquid and money market schemes account for about a fifth of the fund sector's overall corpus under management. As of August 31, the total AUM under this category stood at Rs 2.34 lakh crore. If one includes income funds, overall debt assets would soar to Rs 8 lakh crore, about 64 per cent of the sector's size of Rs 12.55 lakh crore.
