{"id":28760,"date":"2026-07-06T09:28:05","date_gmt":"2026-07-06T09:28:05","guid":{"rendered":"https:\/\/wp-api.pocketful.in\/blog\/?post_type=mutual-funds&#038;p=28760"},"modified":"2026-07-06T09:28:06","modified_gmt":"2026-07-06T09:28:06","slug":"side-pocketing-in-mutual-funds","status":"publish","type":"mutual-funds","link":"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/","title":{"rendered":"Side Pocketing in Mutual Funds Explained: SEBI Rules, Pros &amp; Cons"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">A lot of investors look at debt mutual funds as a completely safe bet these days. But let\u2019s be real, the risk of credit default never truly goes away. If a company that issued a bond starts struggling financially, the hit is felt by the fund too. That&#8217;s exactly where side pocketing in mutual funds comes in as a lifesaver to protect your hard-earned money. In this article, we\u2019ll break down in plain English what side pocketing actually means, how it operates, the pros and cons, and what SEBI has to say about it.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#What_Is_Side_Pocketing_in_Mutual_Funds\" title=\"What Is Side Pocketing in Mutual Funds?\u00a0\">What Is Side Pocketing in Mutual Funds?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#How_Does_Side_Pocketing_in_Mutual_Funds_Work\" title=\"How Does Side Pocketing in Mutual Funds Work?\u00a0\">How Does Side Pocketing in Mutual Funds Work?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Why_Mutual_Funds_Introduce_Side_Pocketing\" title=\"Why Mutual Funds Introduce Side Pocketing\u00a0\">Why Mutual Funds Introduce Side Pocketing\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#SEBI_Rules_for_Side_Pocketing_in_Mutual_Funds\" title=\"SEBI Rules for Side Pocketing in Mutual Funds\u00a0\">SEBI Rules for Side Pocketing in Mutual Funds\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Which_Mutual_Funds_Can_Use_Side_Pocketing\" title=\"Which Mutual Funds Can Use Side Pocketing?\u00a0\">Which Mutual Funds Can Use Side Pocketing?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Side_Pocketing_vs_Normal_Mutual_Fund_Portfolio\" title=\"Side Pocketing vs Normal Mutual Fund Portfolio\u00a0\">Side Pocketing vs Normal Mutual Fund Portfolio\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Benefits_of_Side_Pocketing_in_Mutual_Funds\" title=\"Benefits of Side Pocketing in Mutual Funds\u00a0\">Benefits of Side Pocketing in Mutual Funds\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Risks_and_Limitations_of_Side_Pocketing\" title=\"Risks and Limitations of Side Pocketing\u00a0\">Risks and Limitations of Side Pocketing\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/wp-api.pocketful.in\/blog\/mutual-funds\/side-pocketing-in-mutual-funds\/#Frequently_Asked_Questions_FAQs\" title=\"Frequently Asked Questions (FAQs)\">Frequently Asked Questions (FAQs)<\/a><\/li><\/ul><\/nav><\/div>\n<h2 id=\"h-what-is-side-pocketing-in-mutual-funds\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Is_Side_Pocketing_in_Mutual_Funds\"><\/span>What Is Side Pocketing in Mutual Funds?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Essentially, side pocketing in mutual funds is a process wherein a distressed or defaulting debt security (such as a bond or debenture) held in a debt mutual fund&#8217;s portfolio is separated from the rest of the investments. This measure is taken when there is a significant downgrade in the security&#8217;s credit rating or an increased risk of default. This prevents an undue impact on the value of the remaining portfolio and ensures fair treatment for existing investors.<\/p>\n\n\n\n<h3 id=\"h-meaning-of-side-pocketing\" class=\"wp-block-heading has-medium-font-size\">Meaning of Side Pocketing<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In simple terms, side pocketing involves a mutual fund segregating its risky assets. Consequently, the fund splits into two parts: a &#8216;Main Portfolio&#8217; containing standard investments, and a &#8216;Segregated Portfolio&#8217; holding only the distressed security. Investors receive units for both portfolios, but new investments are accepted only into the Main Portfolio.<\/p>\n\n\n\n<h2 id=\"h-how-does-side-pocketing-in-mutual-funds-work\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_Does_Side_Pocketing_in_Mutual_Funds_Work\"><\/span>How Does Side Pocketing in Mutual Funds Work?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Side pocketing in mutual funds applies only when a serious credit event such as a default or a significant downgrade in credit rating occurs with a debt security. The fund house then segregates the affected security from the rest of the portfolio, allowing the performance of the healthy investments to continue independently.<\/p>\n\n\n\n<figure class=\"wp-block-table has-small-font-size\"><table><thead><tr><th>Phase<\/th><th>What happens?<\/th><\/tr><\/thead><tbody><tr><td>A credit event occurs.<\/td><td>The credit rating of a bond or debt security suddenly drops, or it defaults.<\/td><\/tr><tr><td>The AMC makes the decision.<\/td><td>The Asset Management Company decides to implement side-pocketing in accordance with SEBI regulations.<\/td><\/tr><tr><td>The portfolio is separated.<\/td><td>The affected debt security is removed from the main portfolio and placed in a segregated portfolio.<\/td><\/tr><tr><td>Units are divided.<\/td><td>On the day side-pocketing is implemented, existing investors receive units of both portfolios.<\/td><\/tr><tr><td>The main portfolio operates normally.<\/td><td>All other high-quality investments continue to be managed as before, and their NAV is updated separately.<\/td><\/tr><tr><td>Payment is received upon recovery.<\/td><td>If any amount is recovered in the future from a defaulted security, the benefit is extended only to the investors eligible at that time.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Example: <\/strong>Suppose a bond worth \u20b98 crore defaults within a debt mutual fund&#8217;s total portfolio of \u20b9100 crore. In such a scenario, the defaulted bond (worth \u20b98 crore) is moved to a separate &#8216;segregated portfolio,&#8217; while the remaining investment of \u20b992 crore stays in the &#8216;main portfolio.&#8217; This allows the NAV of the healthy investments to continue independently; furthermore, if any recovery is subsequently made from the defaulted bond, the benefit accrues solely to the investors holding units at that time.<\/p>\n\n\n\n<h2 id=\"h-why-mutual-funds-introduce-side-pocketing\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Mutual_Funds_Introduce_Side_Pocketing\"><\/span>Why Mutual Funds Introduce Side Pocketing\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The objective of side pocketing is to ensure fair treatment of investors during a credit event and to enhance fund transparency.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Protects Existing Investors: <\/strong>When the value of a debt security drops suddenly, side pocketing segregates it. This safeguards the interests of existing investors and prevents new investors from taking unfair advantage of the situation.<\/li>\n\n\n\n<li><strong>Prevents Panic Redemptions: <\/strong>If a distressed asset is not segregated, many investors might panic and redeem their units immediately. Side pocketing helps manage this situation and ensures equitable treatment for all investors.<\/li>\n\n\n\n<li><strong>Ensures Fair Valuation: <\/strong>Once the distressed security is segregated, the Net Asset Value (NAV) of the main portfolio is determined based on its actual value. This keeps the fund&#8217;s valuation more transparent and accurate.<\/li>\n\n\n\n<li><strong>Improves Portfolio Management: <\/strong>When a risky security is segregated, the fund manager can focus more effectively on healthy investments. Additionally, it becomes easier to separately manage the recovery process for the affected asset.<\/li>\n<\/ul>\n\n\n\n<h2 id=\"h-sebi-rules-for-side-pocketing-in-mutual-funds\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SEBI_Rules_for_Side_Pocketing_in_Mutual_Funds\"><\/span>SEBI Rules for Side Pocketing in Mutual Funds\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">SEBI has formulated clear rules for side-pocketing to ensure it is used only in the event of a genuine credit event and that investors&#8217; interests remain protected.<\/p>\n\n\n\n<figure class=\"wp-block-table has-small-font-size\"><table><thead><tr><th>SEBI Rule<\/th><th>What does it mean?<\/th><\/tr><\/thead><tbody><tr><td>Applicable only to Credit Events.<\/td><td>Side pocketing can be initiated only when the credit rating of a debt or money market instrument falls below investment grade or undergoes a further downgrade.<\/td><\/tr><tr><td>Decision at the AMC&#8217;s discretion<\/td><td>Creating a side pocket is not mandatory. The decision rests with the concerned Asset Management Company (AMC), but it must adhere to SEBI regulations and scheme documents.<\/td><\/tr><tr><td>Provisions in scheme documents are essential.<\/td><td>Side-pocketing in a mutual fund scheme can be undertaken only if it has been previously authorized in the Scheme Information Document (SID) and the Statement of Additional Information (SAI).<\/td><\/tr><tr><td>Only existing investors benefit<\/td><td>Only those investors who hold units at the time of side-pocketing are entitled to the segregated portfolio; investors who invest subsequently do not have this right.<\/td><\/tr><tr><td>Separate NAV for Main Portfolio and Segregated Portfolio<\/td><td>After side-pocketing, the NAV for both portfolios is calculated and published separately to ensure accurate valuation.<\/td><\/tr><tr><td>Trustee Approval and Disclosure<\/td><td>Following a credit event, the AMC is required to obtain the Trustee&#8217;s approval and inform investors through press releases, the website, and other channels.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Read Also: <\/strong><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/best-books-on-mutual-funds\/\">Best Books on Mutual Funds for Beginners in India<\/a><\/p>\n\n\n\n<h2 id=\"h-which-mutual-funds-can-use-side-pocketing\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Which_Mutual_Funds_Can_Use_Side_Pocketing\"><\/span>Which Mutual Funds Can Use Side Pocketing?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Side pocketing is primarily used in mutual funds that invest in debt securities where there is a possibility of credit risk.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Credit Risk Funds: <\/strong>These funds invest in bonds with relatively lower credit ratings; therefore, the likelihood of side pocketing is higher in these funds.<\/li>\n\n\n\n<li><strong>Corporate Bond Funds: <\/strong>If a credit event occurs regarding a corporate bond, side pocketing can be implemented if necessary.<\/li>\n\n\n\n<li><strong>Banking &amp; PSU Debt Funds: <\/strong>These funds invest in debt instruments issued by banks and PSUs. Side pocketing may be utilized in the rare event of a credit event.<\/li>\n\n\n\n<li><strong>Short Duration &amp; Dynamic Bond Funds: <\/strong>If a severe credit event occurs involving a debt security held in their portfolios, side pocketing can be implemented in accordance with SEBI regulations.<\/li>\n<\/ul>\n\n\n\n<h2 id=\"h-side-pocketing-vs-normal-mutual-fund-portfolio\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Side_Pocketing_vs_Normal_Mutual_Fund_Portfolio\"><\/span>Side Pocketing vs Normal Mutual Fund Portfolio\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table has-small-font-size\"><table><thead><tr><th>Parameter<\/th><th>Normal Mutual Fund Portfolio<\/th><th>Side Pocketed Portfolio<\/th><\/tr><\/thead><tbody><tr><td>Portfolio Structure<\/td><td>Best Books on Mutual Funds for Beginners in India<\/td><td>It is divided into a Main Portfolio and a Segregated Portfolio.<\/td><\/tr><tr><td>NAV<\/td><td>There is only one NAV.<\/td><td>Both portfolios have separate NAVs.<\/td><\/tr><tr><td>Risky Security<\/td><td>All securities are held together.<\/td><td>Risky securities are segregated.<\/td><\/tr><tr><td>Investor Eligibility<\/td><td>All investors can invest or redeem in accordance with the standard rules.<\/td><td>Only the investors present at the time of side-pocketing receive units of the segregated portfolio.<\/td><\/tr><tr><td>Recovery<\/td><td>There is no separate recovery process.<\/td><td>Eligible investors are provided benefits upon recovery from the affected security.<\/td><\/tr><tr><td>Purpose&nbsp;<\/td><td>Management of general investments.<\/td><td>Protection of investors&#8217; interests and fair valuation during a credit event.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 id=\"h-benefits-of-side-pocketing-in-mutual-funds\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_Side_Pocketing_in_Mutual_Funds\"><\/span>Benefits of Side Pocketing in Mutual Funds\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Side pocketing in mutual funds plays a crucial role in protecting investor interests while maintaining the fund&#8217;s transparency and fairness.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Fair Treatment for Investors: <\/strong>When a credit event occurs involving a debt security, side pocketing ensures that all investors present at that time are treated equally. This prevents any investor from gaining an unfair advantage by entering or exiting the fund hastily.<\/li>\n\n\n\n<li><strong>Better Transparency: <\/strong>Once side pocketing is implemented, the main portfolio and the segregated portfolio are displayed separately. This allows investors to clearly distinguish between standard investments and securities affected by credit risk.<\/li>\n\n\n\n<li><strong>Accurate NAV Calculation: <\/strong>The risky security that has been segregated does not impact the NAV of the main portfolio. Consequently, the fund&#8217;s value reflects a more accurate picture based on the remaining investments.<\/li>\n\n\n\n<li><strong>Easier Recovery Process: <\/strong>If any amount is recovered in the future from the defaulted debt security, it is distributed only to the eligible investors. This makes the entire recovery process more organized and transparent.<\/li>\n\n\n\n<li><strong>Better Portfolio Management: <\/strong>By segregating the risky asset, the fund manager can manage the healthy portfolio more effectively. This allows the remaining investments to continue functioning normally without their performance being unduly affected.<\/li>\n<\/ul>\n\n\n\n<h2 id=\"h-risks-and-limitations-of-side-pocketing\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risks_and_Limitations_of_Side_Pocketing\"><\/span>Risks and Limitations of Side Pocketing\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Side pocketing in mutual funds is a safety net for investors, but it&#8217;s not a panacea for every problem. Some investment risks persist.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Recovery Is Not Guaranteed: <\/strong>If a defaulted debt security fails to recover in the future, investments held in a segregated portfolio may result in a full or partial loss.<\/li>\n\n\n\n<li><strong>Money Can Remain Locked: <\/strong>The funds held in a segregated portfolio are not available until the security is recovered or finally resolved. Therefore, investors may have to wait.<\/li>\n\n\n\n<li><strong>Value May Continue to Decline: <\/strong>If the financial condition of the affected company worsens, the value of the segregated portfolio may decline further.<\/li>\n\n\n\n<li><strong>Not Applicable in Every Situation: <\/strong>Side pocketing is only applicable in the event of a serious credit event, such as a default or a major credit rating downgrade. It is not applicable in all market fluctuations.<\/li>\n\n\n\n<li><strong>Doesn&#8217;t Eliminate Investment Risk: <\/strong>Side pocketing certainly buffers losses, but it doesn&#8217;t completely eliminate investment risk. Therefore, it&#8217;s always important to understand a debt mutual fund&#8217;s credit quality and portfolio holdings when choosing a debt mutual fund.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Read Also: <\/strong><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/treps\/\">What is TREPS &amp; Why Mutual Funds Invest in it?<\/a><\/p>\n\n\n\n<h2 id=\"h-conclusion\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Side-pocketing in <a href=\"https:\/\/www.pocketful.in\/mutual-funds\">mutual funds<\/a> is a crucial provision designed to protect investors&#8217; interests, particularly when a credit event occurs involving a debt security. While it does not entirely prevent losses, it helps maintain the fund&#8217;s transparency and fairness. Therefore, it is advisable to make an informed decision by understanding the credit quality, portfolio, and risk profile before investing in any debt mutual fund.<\/p>\n\n\n\n<figure class=\"wp-block-table has-small-font-size\"><table><thead><tr><th class=\"has-text-align-left\" data-align=\"left\">S.NO.<\/th><th class=\"has-text-align-left\" data-align=\"left\">Check Out These Interesting Posts You Might Enjoy!<\/th><\/tr><\/thead><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">1<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/what-is-an-ipo-mutual-fund-should-you-invest\/\">What Is An IPO Mutual Fund? Should You Invest?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">2<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/taxation\/\">Mutual Fund Taxation \u2013 How Mutual Funds Are Taxed?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">3<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/is-your-mutual-fund-investment-safe\/\">Is Your Mutual Fund Investment Safe?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">4<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/open-ended\/\">What is an Open-Ended Mutual Fund &amp; How to Invest in it?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">5<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/how-to-stop-sip\/\">How to Cancel Mutual Fund SIP?<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">6<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/interest-rates-impact-mutual-funds\/\">How Interest Rates Impact Mutual Funds in India<\/a><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">7<\/td><td class=\"has-text-align-left\" data-align=\"left\"><a href=\"https:\/\/www.pocketful.in\/blog\/mutual-funds\/best-mutual-funds-for-lump-sum-investment\/\">Best Mutual Funds for Lumpsum<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 id=\"h-frequently-asked-questions-faqs\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span>Frequently Asked Questions (FAQs)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"saswp-faq-block-section\"><ol style=\"list-style-type:none\"><li style=\"list-style-type: none\"><h3 class=\"\">What is side pocketing in mutual funds?<\/h3><p class=\"saswp-faq-answer-text\">It is the process of separating bad debt securities from the rest of the portfolio.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Why is side pocketing used?<\/h3><p class=\"saswp-faq-answer-text\">It is done to protect the interests of existing investors and maintain fund transparency.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Which mutual funds can use side pocketing?<\/h3><p class=\"saswp-faq-answer-text\">It is mainly used in debt mutual funds.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Can I redeem my units after side pocketing?<\/h3><p class=\"saswp-faq-answer-text\">Yes, but the amount of the segregated portfolio depends on the recovery.<\/p><li style=\"list-style-type: none\"><h3 class=\"\">Does side pocketing eliminate investment risk?<\/h3><p class=\"saswp-faq-answer-text\">No, it only segregates risky assets.<\/p><\/ul><\/div>","protected":false},"excerpt":{"rendered":"<p>A lot of investors look at debt mutual funds as a completely safe bet these days. But let\u2019s be real, the risk of credit default never truly goes away. If a company that issued a bond starts struggling financially, the hit is felt by the fund too. That&#8217;s exactly where side pocketing in mutual funds [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":28763,"parent":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[19],"tags":[],"class_list":["post-28760","mutual-funds","type-mutual-funds","status-publish","format-standard","has-post-thumbnail","hentry","category-mutual-funds"],"acf":{"freelancer":"Harjyot"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.13 (Yoast SEO v21.2) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is Side Pocketing in Mutual Funds?<\/title>\n<meta name=\"description\" content=\"Learn what side pocketing in mutual funds means, how it works, SEBI rules, benefits, risks, and why debt funds use it during credit defaults. 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