Is your debt fund investment safe? Monday, Mar 09, 2020
Debt fund investors are once again alarmed by the shakeout in the credit market particularly in the wake of recent incidents in the banking and telecom sectors. The credit market was recovering at tepid pace from the fallout of IL&FS in Sep' 2018 and subsequent crisis in the NBFC space. As the market started stabilizing on the back of aggressive rate cuts and abundant liquidity infusion by the RBI and support from the government, system got hit from first the stress in the telecom sector and now imposition of moratorium on Yes Bank.
The credit market is anyways under pressure due to unprecedented slowdown in the broader economy. The recent events are likely to make the credit markets more vulnerable.
Given that liquidity conditions are likely to remain in surplus mode, returns from overnight and liquid funds and money market fund which do not take too much credit risks, should also remain muted in line with the Repo Rate.
There will be recommendations to allocate to credit risk strategies given the fall in yields of government bonds and AAA companies. However, as we have been highlighting for some time, we do not yet see the end of the credit crisis in the bond markets despite the RBI's actions, and crisis in the NBFCs, telecom and now banking sector are extension of the same crisis.
Thus debt investors need to apply extra caution while choosing debt funds. We advise investors to prefer safety and liquidity over returns in this environment rather than trying to earn higher returns from bond funds.
We once again like to reiterate that Quantum Liquid Fund (QLF) prioritizes safety and liquidity over returns and invests only in less than 91 day maturity instruments issued by Government Securities, treasury bills and top rated PSUs.
Quantum Dynamic Bond Fund (QDBF) takes higher interest risks, but does not take any credit risks and is invested only in Government Securities, treasury bills and top rated PSU bonds.
|Name of the Scheme||This product is suitable for investors who are seeking*||Riskometer|
|Quantum Liquid Fund|
(An Open Ended Liquid Scheme)
|• Income over the short term|
• Investments in debt / money market instruments
|Quantum Dynamic Bond Fund|
(An Open Ended Dynamic Debt Scheme Investing Across Duration)
|• Regular income over short to medium term and capital appreciation|
• Investment in Debt / Money Market Instruments / Government Securities
Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
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Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.