After Franklin, another mutual fund in trouble

Tribune News Service

New Delhi, April 25

Franklin Templeton’s decision to freeze six debt schemes was followed today by Bank of India marking down seven securities in its mutual fund portfolio.

Bank of India Mutual Fund, the second after Franklin Templeton, to accept the problem of severe illiquidity in the debt market, said the redemption-related selling by mutual funds has pushed the credit market in almost freeze mode. With money not coming in and people pressing for redemption, BoI said investors are currently moving to safer assets till the situation improves.

Sources here pointed out that the contagion is so far restricted to debt funds of a particular type and the trend is towards freezing the fund during a bad time. This means that the mutual funds will remain invested in most debts that are undergirded by sound fundamentals.