{"id":539,"date":"2019-06-27T12:28:22","date_gmt":"2019-06-27T12:28:22","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=539"},"modified":"2019-06-27T13:19:15","modified_gmt":"2019-06-27T13:19:15","slug":"sebi-clears-dhfls-way-to-exit-mf-business-will-it-affect-your-investments","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/06\/27\/sebi-clears-dhfls-way-to-exit-mf-business-will-it-affect-your-investments\/","title":{"rendered":"SEBI Clears DHFL\u2019s Way to Exit MF Business! Will It Affect Your Investments?"},"content":{"rendered":"\n

On December 27, 2018, we had written about DHFL\u2019s plan<\/a> to sell its stake in the mutual fund business, and the impact on mutual fund<\/a> investors. <\/p>\n\n\n\n

In just 3-4\nmonths, DHFL had witnessed a severe drop in its credit rating from \u201cAAA\u201d to\n\u201cD\u201d. <\/p>\n\n\n\n

As you might be aware,\u00a0DHFL Pramerica Mutual Fund<\/a>\u00a0was a joint venture (50:50) between DHFL, and Prudential Financial Inc. (PFI). As DHFL ran into financial troubles, it decided to offload its stake to its JV partner. This month, i.e. in June 2019, DHFL defaulted twice on its debt repayment schedule<\/a>.<\/p>\n\n\n\n

[Read:<\/strong> How Is DHFL\u2019s Interest Delay Impacting Your Debt Mutual Funds<\/a>]\u00a0\u00a0 <\/p>\n\n\n\n

And that\u2019s the\nstory in a nutshell. <\/p>\n\n\n\n

Recently, DHFL received\nSEBI\u2019s approval to exit the mutual fund business. <\/p>\n\n\n\n

Exchange filing\nof DHFL stated:<\/p>\n\n\n\n

We wish to inform you that SEBI vide its letters June 25, 2019 addressed to DPAMPL has granted its prior approval for proposed change in controlling interest of DPAMPL and for amendment in trust deed under the applicable provisions of SEBI (Mutual Funds) Regulations, 1996 subject to certain conditions.<\/b><\/em><\/p>\n\n\n\n

Mr Ajit Menon, CEO of DHFL Pramerica Mutual Fund, briefed the media after DHFL received the approval, and said, \u201cWe are happy to receive the final approval from SEBI. We now need to complete a few more formalities, including giving a load-free exit window to investors, in line with the\u00a0SEBI\u00a0requirement, for change in control and other fundamental attribute changes.\u201d<\/em><\/p>\n\n\n\n

Should existing investors exit from DHFL Pramerica\nMutual Fund schemes?<\/strong><\/p>\n\n\n\n

Exposure to DHFL papers has severely impacted the NAVs of many debt schemes of DHFL Mutual Fund which include DHFL Pramerica Medium Term<\/a>\u00a0,\u00a0 DHFL Pramerica Floating Rate Fund<\/a>,\u00a0and DHFL Pramerica Low Duration Fund<\/a> among others. Exiting from them at this juncture, especially when there seems to be some light at the end of the tunnel, may not be advisable. <\/p>\n\n\n\n

As remains the\nquestion of other schemes, one should analyse the performance after Pramerica\ntakes over the mutual fund business completely. If it introduces best global\npractices and robust investment processes & systems that results in\nimprovement of the schemes\u2019 performances, you may continue with them; else,\nfinding alternatives is the right choice. <\/p>\n\n\n\n

Lessons to learn from the DHFL episode\u2026<\/strong><\/p>\n\n\n\n

Mutual fund\nindustry players have plenty to learn from DHFL Mutual Fund investing in DHFL\npapers and the subsequent exit of DHFL from the mutual fund business. <\/p>\n\n\n\n

While DHFL takes\ncredit of having honoured the debt obligations worth Rs 40,000 crore, it fails\nto explain why its mutual fund invested in its papers in the first place,\nespecially when the company was sailing through tough times. In fact, we have observed\nthis in the case of Reliance Nippon Mutual Fund\u2019s case\u2014its schemes too invested\nin Reliance ADAG group\u2019s troubled companies. <\/p>\n\n\n\n

[Read:<\/strong> Reliance Mutual Fund Presses The Exit Button: What Should Investors Do<\/a>?]<\/p>\n\n\n\n

Hence, for\nmutual fund advisors and investors it\u2019s imperative to do a background check of\nthe promoter of a mutual fund house before investing in any of its schemes. <\/p>\n\n\n\n

Some business\ngroups in India are always in the limelight for their irrational business\nexpansion, poor record of corporate governance, and hasty decision-making. <\/p>\n\n\n\n

Do you think\nmutual funds floated by such corporate houses can ever manage money judiciously?\nIf you invest in them, you might be in for a nasty surprise eventually. <\/p>\n\n\n\n

As against this, some business houses in India are known for their exemplary governance. Barring a few exceptions, the mutual fund houses floated do follow stringent investment systems and processes. They don\u2019t try to grow their AUM by launching NFOs senselessly but manage sensibly. <\/p>\n\n\n\n

Pick mutual funds carefully\u2026<\/strong><\/p>\n\n\n\n

If you are concerned about investing in a mutual fund scheme that could fulfil your\/client\u2019s financial goals<\/a>, take the time to research and choose it wisely. Pay attention to various\u00a0quantitative and qualitative factors<\/a>\u00a0when selecting schemes for the portfolio.<\/p>\n\n\n\n

[Read:<\/strong> Why Qualitative Aspects Are So Important To Pick Mutual Funds<\/a>]<\/strong><\/p>\n\n\n\n

Further, be\nmindful to your\/client\u2019s risk appetite, investment objectives of the scheme,\nfinancial goals, and the investment time horizon before goals befall. <\/p>\n","protected":false},"excerpt":{"rendered":"

On December 27, 2018, we had written about DHFL\u2019s plan to sell its stake in the mutual fund business, and the impact on mutual fund investors. In just 3-4 months, DHFL had witnessed a severe drop in its credit rating from \u201cAAA\u201d to \u201cD\u201d. As you might be aware,\u00a0DHFL Pramerica Mutual Fund\u00a0was a joint venture…<\/p>\n","protected":false},"author":3,"featured_media":545,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/539"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=539"}],"version-history":[{"count":6,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/539\/revisions"}],"predecessor-version":[{"id":547,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/539\/revisions\/547"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/545"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=539"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=539"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=539"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}