Franklin Templeton, which had recently shocked investors by closing down six debt schemes, has generated enough cash in other fixed income schemes to meet any redemption pressure.
Sanjay Sapre, President, Franklin Templeton (India), said other fixed income schemes, which are open for subscription and redemption, invest in highly liquid instruments such as government securities and AAA rated papers.
“We have already generated a significant amount of liquidity in these portfolios to meet any redemption request we may receive,” he said in a note to investors.
Allaying investors’ concerns that their money is not lost in six schemes that were closed, Sapre said the trustees will start to return the money as the schemes liquidate the portfolio holdings subject to market conditions, receipt of coupon payments and scheduled maturities.
The schemes have their maturity profile, and, in general, shorter duration schemes will be able to return investors’ money faster. It will be the endeavour of the fund house to return investors’ money ahead of maturity dates of the underlying securities by monetising them without resorting to distress sale, he said.
The six schemes have invested in papers across the credit rating spectrum ― from AAA to A rated. The strategy served investors till recent times and generated cash flow even during the last six months which were turbulent times for the credit market. It generated significant amount of cash, mostly from AA rated papers, he said.
The current Covid-19 pandemic created a severe market dislocation, particularly for the types of investments that these six schemes hold, though the lack of risk appetite, reduced volumes and illiquidity for corporate bonds was a broader market issue. The inability of the schemes to meet daily redemption was the direct result of the market condition created by the pandemic and the extended lockdown, said Sapre.
“The extraordinarily difficult decision to close six of our schemes in a category that we had created was taken as it was the only viable option to preserve value for our investors in the current unprecedented environment,” he said.
Assuring investors that Franklin Templeton is not quitting India, Sapre said the fund house is doing all it can to return investors’ money at the earliest and regain their trust in the brand.