The Risk Factor
It is a truism of investment that high returns go hand in hand with high risk. When the economy is doing well, most investors focus on returns alone, not paying sufficient heed to risk. Mutual funds, which have taken a hit due to defaults by two Essel Group companies, are no different.
The Essel Group companies, to which mutual funds have lent a combined Rs 7,000 crore against debt securities, are now unable to honour some of their immediate term obligations. There has been deferment of payout, rollover and haircuts in arguably the safest product in fixed income. Kotak Mahindra AMC has reportedly informed its investors that it may not be
able to immediately redeem the entire amounts in multiple schemes, while HDFC AMC, India's largest asset manager, has extended the maturity of one of its fixed maturity plans maturing on April 15 to April 29. Last year, too, after Infrastructure Leasing and Financial Services (IL&FS) defaulted on inter corporate deposits and
