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Franklin Templeton fund closure: How did Santosh Kamath, the master of managing credit risk funds, lose the plot?

With 26 years of research experience and 19 years of portfolio management experience, Kamath is said to be a key decision-maker on investing in sub-AAA rated bonds or any form of structured debt. 

April 24, 2020 / 04:13 PM IST

With Franklin Templeton Mutual Fund deciding to wind up its six credit funds, Santosh Kamath, who had managed to make a name for himself as a suave fund manager, is in the spotlight.

An engineer from REC Bhopal,  Kamath had joined Franklin Templeton Mutual Fund 14 years back in March 2006 as Chief Investment Officer.

Prior to joining Franklin Templeton Investments, he had worked with ING Vysya AMC, Zurich Asset Management, SBI Mutual, CRISIL and Jardine Fleming Asset Management.

He had also done  PGDM (Management) from XLRI Jamshedpur.

Also Read: AMFI reassures debt fund investors after Franklin Templeton shuts six schemes

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With 26 years of research experience and 19 years of portfolio management experience, Kamath is said to be a key decision-maker on investing in sub-AAA rated bonds or any form of structured debt.

Also Read: Franklin Templeton issue: Advisors may not recommend debt funds in a hurry

Kamath was responsible for setting up the research infrastructure for the fixed-income team at Franklin Templeton and was known to have a strong influence on the investment decisions.

On April 23, the fund house decided to wind up six of its schemes managed by the experienced fund manager.

Also Read: Franklin Templeton India closes 6 funds. 6 questions answered

These six schemes are: 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.

Franklin Templeton fund closure latest updates

His peers say he followed same strategy across six debt schemes which may have affected the schemes that are claimed to be seeing huge redemptions.

In the recent months, all of these six funds had written down their respective exposure to troubled bonds of Vodafone Idea Ltd and a few of these also wrote down their exposures to Yes Bank Ltd.

Also, industry executives said the organisational structure at the fund house may have added to the problems.

Kamath was reporting directly to Asia Pacific bosses of Franklin Templeton Global AMC, instead of Sanjay Sapre, President at Franklin Templeton Mutual Fund-India.

Performance

Sadly, the performance of the six funds don't draw a pretty picture. In fact, most of them were at the bottom in their respective segments.

According to Value Research, Franklin India Low Duration Fund (FILDF) has given 7.7 percent returns  since its inception in 2010. In the past one year until April 23, the scheme has delivered a negative return of 7.11 percent. In the Debt: Low Duration category, there are total 26 schemes and this fund is in the 25th spot.

Franklin India Dynamic Accrual Fund Returns is the last in its category as returns fell 3.24 percent.

The Franklin India Credit Risk Fund Return scheme has delivered negative average return of 6.20 percent. In the debt: credit risk category, it was in 17th position out of 20 schemes.

Franklin India Short Term Income Plan has posted negative average returns of 5.39 percent and is last in its category.

The Franklin India Ultra Short Bond Fund-Returns scheme is also last in the ultra-short category.

Franklin India Income Opportunities Fund (FIIOF)-Returns has given negative average return of 3.30 percent and is in 17th position out of 18 in the medium duration category.
Himadri Buch

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