One thing every MBA student & RM & Financial adviser and every other tom, dick & harry involved in business of investing will tell you is – Equity = risky and Debt = safety. However, if recent event with regards to one JP Morgan Scheme are to go by, you would be in for some shock.
So JP Morgan Asset Management Company put out notice/press release on 28-Aug-15. here is copy Link here or below is the content copy paste
“In the general interest of the Unit Holders of the JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund, JPMorgan Mutual Fund India Private Limited, the Trustee Company, has decided to limit the redemptions in the above referred two schemes effective August 28, 2015. Accordingly, the Redemptions in these two schemes will be limited (“gated”) to a percentage limit not exceeding 1% of the total number of Units outstanding on any Business Day as mentioned in the Paragraph III. Units & Offer, Section B. Ongoing Offer Details ‘Right to limit Redemptions’ of the Scheme Information Document of each scheme and the Trust Deed. Any Units which consequently are not redeemed on a particular Business Day will, subject to the further application of the Trustee Company’s right to limit Redemption, be carried forward for Redemption to the next Business Day. Redemptions so carried forward will be priced on the basis of the Applicable NAV (subject to the prevailing Exit Load) of the Business Day on which Redemption is made.
Investors should note that Redemptions shall include Switches, STPs and SWPs also.
Each capitalized term herein has the meaning assigned to such term in the Scheme Information Document.
This notice must be read in conjunction with, and forms an integral part of; the Scheme Information Document (SID) and Key Information Memorandum (KIM) of the JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund and may not be distributed without the SID or KIM”
In simplified word it means, if you have invested in this particular debt mutual fund scheme, you just can’t sell/redeem it. rather it is restricted to 1% of total outstanding units on any day. Now one of best thing about MF is liquidity, one can get money pretty easily. but above thing seem to go against very characteristic of MF. so question arises why? well its to do with paper/securities that scheme had invested in. One of the security/paper turned out sour or of not that good quality or they gave money to company as loan and company is now unable to pay….meaning your money is gone…..poof.
I am not sure what happens to investor money, whether they will lose it or probably global parent JP Morgan may bail out to protect its reputation. However henceforth you know if anybody says debt fund are safe how much it really is.