Investigate steep decline in a debt fund's AUM as it can spell trouble

After massive redemption, exposure to poor-quality, illiquid papers can rise to unacceptably high levels

Debt mutual funds (MFs) have once again been hit by downgrades and defaults in debt papers of two companies — Altico Capital and Reliance Business Broadcast News Holdings (RBBNH). Fund houses have a cumulative exposure of Rs 537.67 crore to Altico Capital’s bonds, and of Rs 947.37 crore to the bonds of RBBNH and related entities (August 31, 2019 figures). Net asset values of funds exposed to these papers have seen erosion.    

Altico Capital is a non-banking financial company that is paying the price for its heavy exposure to the real estate sector. As for RBBNH, the group has