Does your AMC act to protect your money?

I noticed a strange bump in the NAV history of Bank of India Short Term Income Fund. The fund’s NAV on 3rd November 2024 was ₹27.05. The NAV went up by 1.9% on 4th Nov to 27.57.

Screenshot from Value Research Online

I was curious what went on and started digging. To my surprise, there was no news coverage about this at all. Comparing the fund’s October and November fact sheets did not give any clue. After a bit of searching around, I found a letter BOI MF had written to their investors about this. The letter says that the fund’s NAV was reduced in 2022 following a default.

After recovery from selling of shares, the outstanding amounts for Bank of India Credit Risk Fund was Rs. 24.11 lacs and for Bank of India Short Term Income Fund was Rs. 6.75 crs.

In November 2024, the fund has received a settlement. The letter says:

After trying to recover the balance outstanding amounts since the default, Bank of India MF (“the Fund”) finally entered into OTS agreement with promoter group and the final OTS amount of Rs. 9.08 lacs for Bank of India Credit Risk fund and Rs. 2.54 crs for Bank of India Short Term Income Fund was received by the Fund respectively on 4th November 2024. The received amount was dully accounted in the NAV of the respective Schemes on 4th November 2024.

Anyone that invested in this fund before 2022 lost some of their money. I have no problem with that; investors sign up for such potential losses when they invest in debt mutual funds.

What makes me sad is that the AMC chose to not create a segregated portfolio with the Coffee Day NCD (despite the fund’s SID allowing portfolio segregation). Any investor that bought into this fund after the NAV fell in 2022 but before it increased in 2024 would have received this 1.9% rise in NAV “for free.” The AMC is essentially taking the previous investors’ money and gifting it to newer investors. Creating a segregated portfolio would have prevented this unfairness altogether. But, for whatever reason, the BOI AMC chose to not create a segregated portfolio.

I wrote an email to the AMC asking about this more than 10 days ago, but they have not responded (other than an automated reply with a ticket reference number).

This is the kind of behaviour—I don’t know what to call it… laziness, lack of integrity, or incompetence—that an investor should be weary of when choosing an AMC. Bank of India AMC has shown that they will not do what’s right for the investors. It is up to us how we act on that information.