Fund Insight for March 2021

No AMC has over 10% exposure in AT1, Basel III tier 2 bonds, but 36 schemes do

The Securities and Exchange Board of India (SEBI)’s circular of March 10, 2021, caps investments by a mutual fund house under all its schemes in bonds with such special features (primarily AT1 and Basel III tier 2) to not more than 10% from one issuer. It also specifies that no MF scheme can hold more than 10% of its net asset value (NAV) of its debt portfolio in such bonds. CRISIL’s analysis of February 2021 MF portfolios shows that none of the fund houses cross the threshold of 10% of such instruments at the asset management company (AMC) level. However, 36 schemes spread across 13 fund houses breach the cap of 10% per scheme in securities.