Hit hardly by the Coronavirus pandemic, Franklin Templeton Mutual Fund has closed down six of its debt schemes in India effective April 23, citing lack of liquidity in the debt market and unprecedented redemptions in these yield-oriented schemes.
The funds which have been shut are Franklin India Low Duration Fund, Ultra Short Bond Fund, Short Term Income Plan, Credit Risk Fund, Dynamic Accrual Fund and Income Opportunities Fund, the company said in a statement.
The fund house will now sell the underlying securities of all these funds over time and pay off their investors in a staggered manner. However, it has not announced details on how it will proceed with winding up of the scheme, except for promising to announce the net asset value of the schemes daily.
With this move, Franklin Templeton Mutual Fund — one of the first global financial firms to launch asset management operations in India — has locked in Rs 308 billion of investor monies, according to reports.
The action is limited to the six funds, which have direct exposure to the higher-yielding, lower-rated credit securities in India that have been most impacted by the ongoing liquidity crisis in the market.
All other funds managed by Franklin Templeton Mutual Fund in India – equity, debt and hybrid – are unaffected by this decision, said the fund house.
“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 company said.
The statement noted that the Trustees of Franklin Templeton Mutual Fund in India, after careful analysis are of “the considered opinion that an event has occurred, which requires these schemes to be wound up and that this is the only viable option to preserve value for unit holders and to enable an orderly and equitable exit for all investors in these unprecedented circumstances”.
It said that individual emails are being dispatched to the unit holders regarding the closure of the schemes.
The trustee or the people authorised by it will continue to realise or dispose-off the assets of the schemes in the best interest of the unit holders. The sale proceeds after discharge of all liabilities and expenses will be paid to the unit holders in proportion to their respective interests in the assets of schemes.
(With agency inputs)