Even as mutual funds’ lending against shares to promoters has triggered concerns, they are far better placed on exposure to a stressed sector: real estate.
Mutual funds’ investment in real estate debt accounts for 2 percent of the industry’s exposure to longer-dated paper. Total assets of income and liquid schemes, which invest in long-term debt, stood at Rs 10.9 lakh crore as of March, according to data released by the Association of Mutual Funds in India. Of this, data by Morningstar show, the market value of investments in real estate non-convertible debentures is Rs 21,462.8 crore. There is no evidence of any stress on any of these investments.
Real estate companies are finding it tough to borrow more or repay existing debt after the surprise defaults of AAA-rated IL&FS group caused a liquidity shortage. That has sparked worries for non-bank lenders who lent to developers. But data suggests mutual funds are largely insulated for the real estate stress.
In all, 19 asset managers have invested in real estate debentures, according to Morningstar. Top five mutual funds account for 83.6 percent of the industry’s investments in such instruments.