ICICI Prudential MF FMPs given high AAAF ratings by Crisil

ICICI Prudential MF FMPs have been given a superior AAAF rating by Crisil

Crisil , the credit rating agency has given a high rating to ICICI Prudential Mutual Fund’s FMPs. This fantastic rating for 35 of ICICI Prudential Mutual Fund FMP schemes is a huge boost for ICICI Prudential FMPs and fixed maturity plan schemes in general

The high rating for ICICI Prudential Mutual Fund’s FMPs indicates that the “credit risk” for these fixed maturity plans is limited

Recently, fingers have been pointed at FMPs for investing their assets in risky debt portfolios, including real estate companies and NBFCs. It looks like ICICI Prudential Mutual Fund’s FMP managers deserve a pat on the back for being conservative in their debt portfolios, leading to a lower credit risk

ICICI Prudential MF FMPs also score high in transparency

By publishing a regular fact sheet indicating their portfolios, ICICI Prudential MF FMPs have also demonstrated a high degree of commitment to transparency in their FMP portfolio investments

Crisil giving ICICI Prudential Mutual Fund a high rating for it FMPs is a short in the arm for the reputation of ICICI Prudential as a mutual fund house

FMP schemes from mutual fund houses have come under great scrutiny in the recent past and allegations of poor portfolio allocation and exposure to credit risk have been made against mutual fund houses in general

In this context, by giving ICICI Prudential FMPs a high rating, for over 35 FMPs, Crisil seems to be suggesting that ICICI Prudential is one of the better managed mutual funds with enough checks and balances in place

“FMP Fixed Maturity Plan schemes need better portfolio disclosure”- Crisil

Crisil has asked for better disclosure of FMP (fixed maturity plan) portfolios by mutual funds

Given the recent crisis of confidence in FMPs (fixed maturity plans) among some investors, Crisil has suggested that domestic mutual funds should provide more transparent disclosure of FMP portfolios

Ideally, FMPs , with the high percentage of Government debt and AAA debt portfolios should be safe

The reason most of us invest in instruments such as Fixed Maturity Plans (FMPs) is that we think debt is absolutely safe!. In fact, most FMP offer documents suggest that the majority of investment of these fixed maturity plans is supposed to be only in high quality paper such as Government securities, AA and AAA debt.

However, rumors persist in the market that the FMP (fixed maturity plan)investment vehicle may have been abused by some mutual fund companies by investing in risky debt in areas such as real estate

Highly leveraged companies in sectors such as real estate are expected to struggle with the impending recession, consumer confidence crisis and credit crunch and there is certainly some risk of corporate debt default, leading to redemptions in select fixed maturity plans (FMPs)

FMPs (fixed maturity plans) are still a great place to invest, if one relies entirely on the offer documents

A senior executive of CRISIL says “85% of FMP portfolios are investment in AAA and P1+ rated securities”. Given this rather assuring outlook, Fixed Maturity Plans do look safer compared to other investment alternatives, despite the smaller sample size of the CRISIL study

CRISIL is right, more disclosures in Fixed Maturity Plan (FMP) portfolios is necessary for investor confidence

The better of the Fixed Maturity Plan fund managers have only to gain by disclosing their portfolios in a transparent manner , akin to open ended funds. Since it appears from the CRISIL study, that most of the Fixed Maturity Plan fund managers have been disciplined investors, it makes sense for FMPs have more transparency

Mutual Fund Managers need to quickly act to provide transparency in FMP portfolios , in view of the recent fall in consumer confidence in this investment vehicle