Creation of Segregated Portfolio by PPFAS

[Dinesh_Ramakrishnan]

I got a mail recently from PPFAs, stating the “Creation of Segregated Portfolio” on their PPLAS Large Cap ( FlexICAP) Mutual Fund.

I was not able to understand the segregation and the table/example they have presented.
Can someone help me under the segregation and how does it affects the existing investor?

Are they going to reduce the number of units holded by the unit holder in the event of credit risk, instead of affecting the NAV price?
In that case, this wont give a true picture of the return on that mutual fund right?

Reference Link : https://amc.ppfas.com/downloads/addendum/2020/change-in-the-fundamental-attributes-of-parag-parikh-long-term-equity-fund-recategorisation-as-a-flexi-cap-change-in-the-name-of-the-scheme-and-inclusion-of-provisions-for-creation-of-segre.pdf?10122020

[siva]

@Bhuvan Can you.

[Bhuvan]

@Dinesh_Ramakrishnan

I was not able to understand the segregation and the table/example they have presented.
Can someone help me under the segregation and how does it affects the existing investor?

This is just an enabling provision. Equity funds park their cash in extremely safe instruments like FDs, Treps, T-Bills stec. This provision is just in case there is a default in on of those instruments, which will be extremely rare. Check this post to know what a side pocket is.

SEBI allows side-pocketing in mutual funds

Interesting development. SEBI now allows side-pocketing in mutual funds. To give you a gist, let’s take the example of IL&FS. Many mutual funds which were holding IL&FS paper marked down the value and some cases wrote off the value of the paper. The new system allows the AMC to sperate this paper from the main fund and split the NAV, hence the term “side-pocket”. The risky portfolio that will be separated consisting of the illiquid/default securities will have a separate NAV but won’t be open fo…

[Dinesh_Ramakrishnan]

Thank you very much for the clarity