When will Franklin Templeton investors get their money back? Here’s what happens to closed credit risk funds

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Updated: Apr 24, 2020 1:23 PM

Franklin Templeton Mutual Fund announced that it will be closing six of its debt funds from April 23, 2020, freezing over Rs 25,000 crore worth of investor’s money.

COVID-19 impact on mutual fund industry, Frankin Templeton India closed 6 debt fund scheme, cash crisis in mutual fund, liquidity crisis in debt fund, low liquidity, low yield, mutual fundThe move, according to Franklin Templeton Mutual Fund has been made due to the liquidity crisis emerging in the wake of the novel coronavirus pandemic.

Franklin Templeton Mutual Fund announced that it will be closing six of its debt funds from April 23, 2020, freezing over Rs 25,000 crore worth of investor’s money. The move has been made due to the liquidity crisis emerging in the wake of the novel coronavirus pandemic, said, Franklin Templeton Mutual Fund. “There has been a dramatic and sustained fall in liquidity in certain segments of the corporate bonds market on account of the Covid-19 crisis and the resultant lock-down of the Indian economy which was necessary to address the same,” the fund house said in a notice issued on Thursday evening. 

The six credit risk funds that Franklin Templeton will be winding up include — • Franklin India Low Duration Fund; Franklin India Ultra Short Bond Fund; Franklin India Short Term Income Plan; Franklin India Credit Risk Fund; Franklin India Dynamic Accrual Fund; Franklin India Income Opportunities Fund. Now the immediate question arises, what does the closure of six funds, with a total AUM of over Rs 25,000 crore as of April 22, mean for investors?

With the winding up of the funds, investors from today will not be able to make any transactions from now on. This means no purchases or redemptions through systematic investment plans, systematic transfer plans, or even systematic withdrawals will not be allowed from now on. The idea behind the move is to secure investor’s money, said, Sanjay Sapre, President, Franklin Templeton.  “It does not mean any write-off in value. We will actively monitor these funds to make the best possible exit,” said Sapre in a conference call on Friday. Franklin Templeton will now look to exit the instruments it has invested in at the “best possible time” and will distribute funds periodically to unitholders.

Post the winding up of these funds, investors whenever the portfolio instruments mature, the fund house will pay it back to investors. In a conference call on Thursday evening, Franklin Templeton said that investors would not have to wait until all the money in the funds is recovered. The staggered payments to investors in these funds could be made monthly or quarterly.

It is to be noted that the closure is restricted to the aforementioned six schemes only. Franklin Templeton has not taken similar measures for any other schemes run by the fund house. 

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