Sanjay Sapre, the current president of Franklin Templeton India Mutual Fund (FT MF), will be replaced by Avinash Satwalekar, who is currently country head for Franklin Templeton in Malaysia.
Sapre will join Franklin Templeton’s Digital Strategy and Wealth Management division from July. He will be responsible for developing and leading Franklin Templeton’s consumer-oriented capabilities globally.
Satwalekar will take over as the new president of FT MF India from June 2022.
Sapre was appointed as president of FT MF in 2016 and during his stint, FT MF decided to wind-up six of its schemes, which shook the mutual fund industry in April 2020.
The schemes were popular among investors as they had offered strong returns in the past, but the Covid-19 outbreak and with the liquidity drying up in debt markets, the credit strategy of these funds started to unravel.
The wind-up decision followed a slew of court cases filed by unitholders against the fund house.
The management of these funds was overseen by Santosh Kamath, chief investment officer-debt at Franklin Templeton India MF.
Court cases against FT MF
While initially the matter was heard by state High Courts, the matter was eventually taken up by the Supreme Court.
The Supreme Court said that the wind-up of mutual fund schemes can only be done after consent of unitholders.
The Supreme Court ruling was also followed by the market regulator – Securities and Exchange Board of India (SEBI) – tweaking the regulations to make the norms around wind-up, compliant with SC’s judgement.
At the same time, the SC allowed the winding-up process for FT MF schemes to continue as investors’ funds were stuck in these schemes.
Bone of contention
Regulation 39 of SEBI’s MF regulations states that the fund house can close or wind-up an open-ended scheme if the trustees feel it is required or if 75 percent of the unitholders of a scheme pass a resolution to wind up the scheme or if SEBI directs the winding up in unitholders’ best interests.
Also read: Karnataka HC raps Sebi for not being proactive in Franklin Templeton wind-up
Franklin Templeton has said that it exercised the first option, when deciding to wind-up six of its debt schemes in April, 2020.
However, certain unitholders of the schemes approached the courts, stating the fund house should have followed regulation 18(15)(c), which says trustees shall obtain consent of the unitholders before winding-up.
Recovery so far
The Supreme Court had asked SBI Mutual Fund to oversee the winding-up of FT MF’s schemes, with FT MF assisting the fund house.
Five of the six schemes have distributed more than 100 percent of their assets under management (as of April 23, 2020 when the wind-up was made effective) as cash to unitholders.
Franklin India Income Opportunities Fund has paid 107 percent of its AUM. Franklin India Low Duration Fund has distributed 110 percent, Franklin India Ultra Short Bond Fund has distributed 105 percent, Franklin India Dynamic Accrual Fund has distributed 103 percent, Franklin India Credit Risk Fund has distributed 103 percent .
Franklin India Short Term Income Plan has distributed 96 percent.
These recoveries have been on the back of debt paper’s maturities, prepayments and part-payments by bond issuers.
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