Matrix Moments, by Matrix Partners India, is a podcast series dedicated to the founders, startups and all those within the ecosystem, through candid conversations on what we think it really takes to survive in this wild, wild startup world. In a world where we are endlessly engulfed with information in all its forms and sizes, this is our attempt to create, curate and bring to you the insights and reflections that we have had the luxury of having learned the hard way, through all the years s ...
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In the last few years, investing in debt mutual funds has been difficult, especially in funds taking credit risks. The liquidity crunch that hit debt markets after Covid-19 pandemic led to redemption pressures on several debt schemes.
When redemption pressures hit a debt scheme, the fund manager is likely to sell higher-rated debt securities, which have some liquidity.
The remaining investors are likely to be left with a portfolio of lower-rated securities and may also have to bear the impact of NAV decline caused by any stressed sales.
In a recent consultation paper, SEBI has proposed the concept of swing pricing, to protect the interests of the investors that are left in the scheme. When debt markets go through disruptions, it is usually the sophisticated institutional investors that exit early, while retail investors are usually left behind.
Through this proposed mechanism, the daily NAV can be adjusted to impose certain costs on exiting investors, in times of market stress.
In today’s Simply Save Podcast, we are joined by Joydeep Sen, corporate trainer-debt markets, to find out more about the concept of swing pricing.