UTI credit risk fund’s net asset value jumps 8% in one day; here’s why
NEW DELHI : The net asset value (NAV) of the UTI Credit Risk Fund climbed 8% on Wednesday after the asset management company upgraded the value of existing DHFL bonds to ??20.5 against zero earlier.
âWith the ongoing developments in the DHFL resolution process, the valuation of the existing DHFL bonds has been reviewed and revised upwards by UTI MF in accordance with the weighted average price given by the valuation agencies to ??20.50 (per face value of ??100) (which was rated zero in UTI programs), âthe company said in a statement.
UTI Mutual Fund previously completely devalued debt securities exposed to DHFL debt securities. This decision came after the delay in the payment of interest and principal on the due date by DHFL.
Last week, UTI MF increased the exit charge on its credit risk fund to 5% for repayment within 12 months. Previously, the exit charge was 1% for redemption within 365 days, for shares greater than 10% of the investment.
UTI Credit Risk Fund, which is the benchmark for Crisil short-term credit risk, has assets under management of ??411 crore as of August 31.
Credit risk funds invest primarily in bonds rated AA or less by rating agencies. The lower rating indicates a higher possibility of default on these bonds when repaying investors’ money
According to the Securities and Exchange Board of India, at least 65% of credit risk fund assets must be invested in papers rated below AA +.
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