Investors caught in mutual funds / Franklin Templeton Mutual Fund closed the scheme of 6 credit funds, investors will not be able to withdraw money

·      This decision will not have any effect on other fund houses

·      But such a decision can make investors away from the fund industry

 There is bad news from the mutual fund industry for debt investors. Leading mutual fund company Franklin Templeton Mutual Fund has discontinued its 6 credit fund schemes due to the Kovid-19 epidemic in India. These schemes include Franklin India Low Duration Fund, Franklin India Dynamic Acrylic Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund. Their total asset under management i.e. AUM till April 22 has been Rs 25,856 crore. After this decision, investors of these schemes will not be able to withdraw money. The company had to take such a decision because there is a large amount of money being withdrawn in the mutual fund industry at the moment and also due to some poor investment. However, this decision may affect investor confidence.





The eighth largest company in the fund industry

Franklin Templeton is the eighth largest company among the 44 companies in the country's mutual fund industry with a total AUM of Rs 11.6 lakh crore. Out of which the AUM of the above 6 schemes is 25,856 crores. According to the press statement issued by the company, all the funds other than the above schemes - equity, debt and hybrid - will not be affected by this decision. The business of has been consolidated, so as to protect the interests of investors through managed sales of portfolios. The fund house said that this action is limited to these 6 funds, which contain elements that have been most affected by the ongoing liquidity crisis in the market.





Message to protect the value of investors

Franklin Templeton-India President Sanjay Sapre said, "The decision to close these funds was extremely difficult, but we believe that it is necessary for our investors to preserve value and this was the only way to secure portfolio assets." He said that after the outbreak of Corona and the lockdown, most debt securities and their unexpected redemption have significantly reduced liquidity in the Indian bond markets.





Investors locked up for further orders

Santosh Kamath, CIO, Franklin Templeton Fixed Income India, said that although the financial health of these funds is deteriorating, accruals in these funds should continue to be the same as the underlying securities held by these funds (underlying securities) are strong. Remains. After this decision of the fund house, if you are the current investor in the above schemes, then your investment is locked until the fund house makes the payment.





Either way neither investment nor money will be able to withdraw

Not only this, you will not be able to do any transaction through SIP, SWP and STP. The higher exposure to these schemes was in lower rated securities. A few weeks ago, there was a sharp decline in the net asset value of NAV of liquid and other short-term debt funds as all the money markets saw problems in yields and debt papers. This decision of the fund house means that you will not be able to withdraw money till the next order. However, when the investment paper matures, then it will be seen how the company pays.





Investments in bonds rated A and AA

According to the Franklin Templeton factsheet, as of March 31, its low liquidity fund had invested 62.8 percent of its assets in bonds with an A rating and 45.76 percent in assets with an AA rating. India Dynamic Acrylic Fund invested 52.7 per cent in AA rated bonds while 44 per cent in A rated bond. Credit Risk Fund invested in papers with a 60 percent AA rating, while bonds with an A rating of 49.6 percent. Short-term income plans invested in 85.6 percent AA ratings and 57.5 percent A ratings, ultra-short bond funds with 82.8 percent AA ratings and 23.9 percent A bonds.





Liquidity problem

This suggests that these debt funds were invested in low-rated bonds where liquidity was a major problem. The fund sold the bonds at a much lower price due to higher redemptions, which caused the fund's portfolio to fall in value. After this decision, it is uncertain how long investors will get their money. Because after the deal with Kovid-19, when the market is normal, then the company will decide.