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April 24, 2020 / 08:56 PM IST

Franklin Templeton fund closure Highlights: 'Investors currently in state of fear and shock'

As Franklin Templeton shut down six of its debt funds on April 23, discussions are abuzz about what impact will this have on the markets and the financial system. Follow this blog to catch live updates:

In an unprecedented decision, Franklin Templeton Mutual Fund has shut six of its open-ended debt funds, effective April 23.

The six schemes are as follows:
- Franklin India Low Duration Fund (FILDF),
- Franklin India Dynamic Accrual Fund,
- Franklin India Credit Risk Fund,
- Franklin India Short Term Income Plan,
- Franklin India Ultra Short Bond Fund, and

- Franklin India

Income Opportunities Fund (FIIOF).

All these schemes followed the high-risk, high-return credit risk strategy. The fund house will now sell the underlying securities of all these funds over time and pay off their investors in a staggered manner.

Templeton will keep trying to liquidate its portfolios as much as it can. Of the money it receives, Sanjay Sapre, President, Franklin Templeton – India has assured that the fund house will keep paying all investors, big or small, proportionately and in installments.

He added that the fund will not charge asset management fee with effect from April 24, the winding date, for as long as it takes for them to redeem the funds completely. Meanwhile, the segregated portfolios of these schemes will continue independently.
  • April 24, 2020 / 12:08 PM IST

    Find our complete coverage of the Franklin Templeton India Fund Closure Crisis here

  • April 24, 2020 / 06:59 PM IST

    Deepak Jasani, Head Of Research, HDFC Securities: The decision by Franklin Templeton to voluntarily wind up six of their debt funds has shaken up the debt mutual fund industry. This coming after a series of NAV write-downs/segregation by various fund houses due to downgrades/defaults by investee companies will not do any good for the risk-on sentiments of retail & HNI investors. This episode once again highlights the weakness in the secondary debt markets in India as they tend to get illiquid by small bouts of micro and macro negative news. Despite the categorization by SEBI, a lot of debt schemes take on risks that are not reflected in their scheme riskometer or their category names. Fund managers with a view to generate higher return tend to take higher risks in the portion of other investments permitted in even safe low risk categories. Investors would also do well to desist from chasing just returns without having regards to the risk taken by the respective schemes. AMFI on its part should educate investors on this aspect (how to assess this risk). On a higher level, faster legal resolutions/recoveries will help in development of buying out of stressed assets and improving the depth and liquidity in secondary debt markets. One hopes that this is a one-off case and we will not see more such cases even though the economy is yet to come out of this difficult phase.

  • April 24, 2020 / 05:31 PM IST

  • April 24, 2020 / 03:44 PM IST

    Franklin Templeton Fund Closure | Reactions
    Franklin Templeton’s fund closure is an eye-opener for the RBI that its liquidity efforts are either insufficient or are not effective in de-freezing the liquidity crisis, Umesh Mehta, Head of Research, Samco Securities, says in an interview to Moneycontrol’s Kshitij Anand. Read here

  • April 24, 2020 / 03:30 PM IST

    Franklin Templeton Fund Closure | Reactions
    After Franklin Templeton Mutual Fund closed six of its open-ended debt funds, many Twitter users shared their views on the unexpected move.

    Here's what Twitter users are saying about Franklin Templeton fund closure

  • April 24, 2020 / 03:20 PM IST

    Franklin Templeton Fund Closure | Reactions
    Abhimanyu Sofat
    , head of research at IIFL Securities told Bloomberg: The closure of Franklin Templeton debt funds will be a jolt to the corporate debt market in India. These funds were one of the top performing for last couple of years due to higher risk being taken by them by lending to lower-rated corporates. We believe it’s time for RBI to be even more strong in its intervention in the credit market.

  • April 24, 2020 / 03:10 PM IST

    Franklin Templeton Fund Closure | Reactions
    Omkeshwar Singh
    , Head - RankMF, Samco Securities: Retail Investors should be prudent while investing in debt funds and should always look only for the quality of the portfolio and should completely ignore past performance, big names and big brands while making investments. Investors have no choice, but to wait so that the liquidity gets back to the lower end of the system as and when the lock down is over and economic activities start, only then the AMC will pay back the realisable money. (2/2)

  • April 24, 2020 / 03:03 PM IST

    Franklin Templeton Fund Closure | Reactions
    Omkeshwar Singh
    , Head - RankMF, Samco Securities: In crisis situations any portfolio with exposure to credit risk debt instruments have risk of liquidity and are will be adversely impacted. Further the debt funds are dominated by corporates and HNIs from investment side and most of the corporates due to Covid 19 lockdown have liquidity issues and are therefore aggressively redeeming debt mutual funds to meet cash requirements. Franklin Templeton was not able to funds these redemptions and therefore winded up 6 schemes under redemption pressure, now as and when the money is realized the same will be credited to the unitholders. (1/2)

  • April 24, 2020 / 02:50 PM IST

    Franklin Templeton Fund Closure | Reactions
    Vidya Bala
    , head of research and co-founder told Bloomberg: The winding up of as many as six funds is unprecedented. Having already used up the liquidity to meet large redemptions, they had no choice but to wind up to prevent a run on the funds that would have induced them to sell good-quality paper and hold on to the bad ones.

  • April 24, 2020 / 02:39 PM IST

    Franklin Templeton Fund Closure | Reactions
    Deven Choksey
    , Managing Director - Investment and Research, KR Choksey Securities told Bloomberg: There is fear in the minds of investors that other mutual funds may not be immune to the problems faced by Franklin Templeton. The Reserve Bank of India and other regulators to roll out further measures to support funds and financial markets.

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