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Apr 24, 2020 02:54 PM IST | Source: Moneycontrol.com
Franklin Templeton fund closure LIVE updates: Government, RBI seized of matter, examining liquidity issues, say sources
As Franklin Templeton shut down six of its debt funds on April 23, dicsussions 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.
Six scheme closed 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. 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.Read More
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Franklin Templeton Fund Closure | Reactions
Vidya Bala, head of research and co-founder Primeinvestor.in 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.
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.
Franklin Templeton Fund Closure | Reactions
Dhruv Mehta, chairman of Foundation of Independent Financial Advisors tells CNBC-TV18: I think the whole market was a non-AAA space. There has been so much fear that extended lockdown will result in some of these non-AAA companies moving from a liquidity situation to maybe an insolvency situation -- that has resulted in a run on the Franklin Templeton.
Franklin Templeton Fund Closure | Reactions
Ananth Narayan, professor, SPJIMR tells CNBC-TV18: Franklin Templeton closing six of its schemes was not about bad credit but heavy redemptions had made the situation challenging amid the coronavirus crisis. I do expect the RBI and maybe the government to step in right now. Fundamentally, the problem is that the liquidity in the secondary market for corporate debt stays limited. Last month in March, the redemptions from the non-liquid, non-overnight funds which is about Rs 7 lakh crore of AUM of mutual funds itself was over Rs 1 lakh crore. In addition, because of the global risk-off, you saw FPI selling bonds as well. So the system is simply not geared towards handling these kind of redemptions at one shot. This is not about insolvency or about bad credit.
Franklin Templeton Fund Closure | Reactions
HDFC Mutual Fund to CNBC-TV18: The Central Bank (RBI) should consider a direct financing line for mutual funds. May need RBI to mull unconventional methods for boosting confidence as there is a need to keep investor confidence intact. The entire corpus of a credit risk fund does not comprise of weak paper. Most of us have no borrowings so there is no need to panic.