Kamath, who didn’t immediately respond to requests to comment on Friday, is far from alone in getting burned as debt markets globally were jolted by the pandemic. At his own firm, the flagship global bond fund run by Michael Hasenstab posted a $4.3 billion decline in assets in the first three months of the year, its worst quarter since 2016. At least 76 European mutual funds with $40 billion in assets suspended redemptions last month, according to Fitch Ratings.
Despite Kamath’s troubles, Morningstar Inc. sounded a note of confidence in the money manager on Friday.
“Our conviction in these funds has stemmed from the experience of Santosh Kamath in the lower credit space, capability of the team in managing credit funds, and robust research infrastructure which has enabled them to shortlist investment worthy companies in the lower credit space for over a decade,” analysts at the company wrote in a report.
Indian debt markets still face significant headwinds. Liquidity levels are low even in good times and they have yet to recover from the collapse of a major infrastructure financier in 2018. The Reserve Bank of India recently moved to provide cheap cash to shadow bankers, but the offerings failed to elicit enough of a response from banks on Thursday.
For Gopikrishnan MS, the former head of foreign exchange, rates and credit for South Asia at Standard Chartered, the lesson for mutual funds is to always hold liquid paper on their books, and especially in times of crisis.
“There should be strict conditions for liquidity of underlying bonds they can invest in,” he said.
This article was provided by Bloomberg News.