A mutual fund is just a pass through vehicle where a fund (scheme) is money held in a trust. The ‘manager’ (like an architect) need not have a net-worth – after all they are just ‘managing’ the money and not owning the money.

Not sure if everybody understands the difference between a bank fixed deposit and a scheme of a mutual fund.

When you keep money in a bank…you look to see if they have enough “net worth” or you ask “Is the capital adequate to pay for the deterioration in the assets”. So for a bank (or a life insurance company) one has to see how much capital it has, and how well its assets are managed.

However, for a mutual fund you need to see how well the portfolio is constructed. Today is perhaps the first time that a FMP is saying that it will not pay in full. This has serious implications.

I have no clue how my manager (employee) – the amc can decide that it is all right to “delay” the repayment of an FMP. They have to pay that much less and say “we will pay if we recover”. It is the first time that a “manager” decides that he will not sell the security – but will wait for 7 months to recover the money.

Imagine I employ a manager to manage my lending business, and when a client defaults my manager DECIDES along with his friends to wait for 6 months..and screw up the value of the security. I would sack and sue him.