Franklin Templeton tries to calm mutual fund investors; here’s what India head says about returning money

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Updated: April 27, 2020 2:46 PM

Franklin Templeton’s top management, in an effort to reassure investors, said that it is committed to returning the money invested at the earliest. The fund house is trying to soothe investors after having closed six of its debt and credit mutual fund schemes.

franklin, franklin templeton, franklin investment, mutual fund, amfiAfter wounding up the six schemes, Franklin Templeton has looked to reassure investors about other fixed income schemes run by the fund house.

Franklin Templeton’s top management, in an effort to reassure investors, said that it is committed to returning the money invested at the earliest. The fund house is trying to soothe investors after having closed six of its debt and credit mutual fund schemes. “We are committed to doing all we can to return monies in the schemes that are wound up at the earliest to investors, and to regain your trust in our brand,” Franklin Templeton Asset Management (India) President, Sanjay Sapre said in a note to investors. The fund house last week announced the closure of six schemes owing to redemption pressure and lack of liquidity in the secondary market.

With an asset under management (AUM) of close to Rs 36,000 crore, the schemes that were closed included — Franklin India Low Duration Fund, 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.

“As the schemes liquidate portfolio holdings subject to market conditions, receive coupon payments and scheduled maturities, the Trustees will start to return monies to investors at the earliest instance in compliance with regulation 41(2)(b) of SEBI (Mutual Fund) Regulations 1996,” Sapre said. The fund house with over 25 years of experience in India has come under the spotlight for investing in low-grade securities. Sapre However clarified that under the investment strategy followed, the closed schemes invested across the credit rating spectrum. “This strategy served the schemes and its investors well until recent times. The schemes were able to generate significant cash flows even during the last 6 months which were more turbulent times for the credit markets,” Sapre said in the note.

After wounding up the six schemes, Franklin Templeton has looked to reassure investors about other fixed income schemes run by the fund house. “Our other fixed income schemes which are open for subscription and redemption, primarily invest in highly liquid securities such as Government Securities, AAA-rated bonds, or other cash and cash equivalents,” Sapre explained to investors. He added that these schemes have enough liquidity to cope-up with the redemption pressure. Industry body Association of Mutual Funds in India (AMFI) too rushed to scene on Friday to assure investors that the majority of the fixed-income mutual fund schemes were safe. 

Coming to aid of the struggling mutual fund industry that is reeling under redemption pressure, the Reserve Bank of India on Monday announced the opening of a special liquidity window for the industry. Under this, the central bank will provide Rs 50,000 crore worth liquidity support to the industry. The amount will be provided to the banks who can then lend the same to the fund houses or buy investment-grade bonds and commercial papers from these fund houses.

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