Kotak MF suspends subscriptions in two debt funds holding Yes Bank AT1 bonds

The two schemes, Kotak Medium Term Fund and Kotak Credit Risk Fund, hold Yes Bank AT1 bonds that were valued at zero after the fund house said they were written off during the reconstruction of the private sector lender in March 2020, in a statement on Thursday.

The suspension came earlier on Thursday, before the Supreme Court delivered its judgment in the Yes Bank AT1 bond matter later in the day, restoring the bonds.

In a move aimed at protecting investors, Kotak Mahindra Asset Management Company has put a temporary hold on subscriptions for two of its mutual fund schemes. This decision follows the zero valuation of Yes Bank AT1 bonds after a significant bank reconstruction in March 2020. Similarly, Tata Mutual Fund has restricted new investments in the Tata Gold ETF Fund of Fund, although existing investments and redemptions will continue uninterrupted.

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Explaining the decision, Kotak Mahindra AMC said it had proactively suspended subscriptions in both schemes "as a prudent measure to safeguard the interest of our investors".

"We are reviewing the judgment and will determine the appropriate course of action," the fund house said.

The AMC added that it had taken similar proactive measures in the past and remained committed to acting in the best interests of its unitholders.

In a separate statement, Tata Mutual Fund said it will temporarily restrict fresh and additional lump-sum investments, switch-ins, top-ups and new SIP and STP registrations in Tata Gold ETF Fund of Fund from October 16.

However, instalments under existing SIPs and STPs will continue to be processed at the applicable NAV.

Redemptions, switch-outs and existing Systematic Withdrawal Plans (SWPs) will also remain permitted.

The suspension will remain in place until further notice, the fund house said.