Mutual funds have recently increased purchases of securitized debt from non-banking financeNSE -0.92 % companies (NBFC), which now sell fewer short-duration commercial papers to raise cash after asset-liability mismatches and IL&FS defaults last autumn curbed fund flows to the sector.
Compared with November, mutual fund purchases of NBFC securitized loans climbed more than 65 per cent in February, with collective industry exposure to these instruments pegged at Rs 95,294 crore.
Reliance Mutual Fund, Franklin Templeton, and ICICI Prudential are among asset managers that are said to have increased their purchases of these papers, said three people with direct knowledge of the matter.
NBFCs are increasingly raising money through loan portfolio sales after IL&FS defaults highlighted the industry’s asset-liability mismatches, restricting the sector’s access to funds. Mutual funds buying these portfolios are issued pass through certificates (PTCs), which are backed by the relevant pool of retail assets.
“PTCs held by asset management companies are originated largely by NBFCs and micro-finance institutions,” said Bhushan Kedar, Director, Mutual Funds Research, CRISIL ..
Three-year PTCs typically provide higher yields, about 1.10 per cent to 1.6 per cent more than similar certificates issued by investment-grade companies. The spread is as high as 2.7 per cent for instruments maturing in seven years, CRISIL data showed.
“The investment in PTCs by mutual funds has grown sharply in recent times and is an indication of the participation by mutual funds in securitized assets,” said Kedar.
Securitization hit a record of Rs 1.9 lakh crore in FY19, com ..
Compared with November, mutual fund purchases of NBFC securitized loans climbed more than 65 per cent in February, with collective industry exposure to these instruments pegged at Rs 95,294 crore.
Reliance Mutual Fund, Franklin Templeton, and ICICI Prudential are among asset managers that are said to have increased their purchases of these papers, said three people with direct knowledge of the matter.
NBFCs are increasingly raising money through loan portfolio sales after IL&FS defaults highlighted the industry’s asset-liability mismatches, restricting the sector’s access to funds. Mutual funds buying these portfolios are issued pass through certificates (PTCs), which are backed by the relevant pool of retail assets.
“PTCs held by asset management companies are originated largely by NBFCs and micro-finance institutions,” said Bhushan Kedar, Director, Mutual Funds Research, CRISIL ..
Three-year PTCs typically provide higher yields, about 1.10 per cent to 1.6 per cent more than similar certificates issued by investment-grade companies. The spread is as high as 2.7 per cent for instruments maturing in seven years, CRISIL data showed.
“The investment in PTCs by mutual funds has grown sharply in recent times and is an indication of the participation by mutual funds in securitized assets,” said Kedar.
Securitization hit a record of Rs 1.9 lakh crore in FY19, com ..
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