IDFC MF introduces side-pocketing provision in its scheme documents1 min read . Updated: 14 Aug 2020, 11:18 AM IST
- Side-pocketing has been introduced in 17 schemes of IDFC Mutual Fund, including pure debt and hybrid schemes
IDFC Mutual Fund has added the enabling provisions for side-pocketing in its scheme information documents (SIDs). It will be effective 19 September.
Side-pocketing or segregation of portfolios is the separation of a portfolio in lieu of bad debt.The Securities and Exchange Board of India (Sebi) had introduced this process in December 2018 and most AMCs have already incorporated it in their SIDs.
Once the enabling provisions are inserted in the scheme documents, an AMC is allowed to carry out side-pocketing if its debt holdings are downgraded below the investment grade or default. Investors in the side-pocketed units receive repayments if and when the borrowers make repayments to the fund. Thus, side-pocketing allows existing investors to exit the remaining part of the scheme without giving up the chance of recovering money on the bad debt. New investors in the scheme are not allotted these units.
Side-pocketing has been introduced in 17 schemes of IDFC Mutual Fund, including pure debt and hybrid schemes. Investors have been given a period of 32 days from 18 August to 18 September, to exit the schemes without paying an exit load if they wish to.
“It is a standard procedure and doesn’t raise any red flags for me. If you are really worried about investments, check the holdings of your fund. However, I do not think this move has any implications on IDFC’s debt portfolio," said Viral Bhatt, founder, Money Mantra.