Franklin Templeton India shuts down six debt funds

Franklin Templeton, one of India’s oldest fund houses is going to wind up its six open-ended debt funds, thanks to the on-going health crisis that is seeping into the financial sector. These debt funds mostly have higher-yielding securities in their portfolio however they are lower-rated, which are most vulnerable to the current liquidity crisis. The foundation for this fall was put after the IL&FS default which was exaggerated by the recent Yes Bank and Vodafone Idea debt crisis.

According to the announcement made by the company, ‘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. At the same time, mutual funds, especially in the fixed income segment, are facing continuous and heightened redemptions.’

The move has been done to preserve value for unitholders and to enable an orderly and equitable exit for all investors in these unprecedented circumstances.  What this means for an investor in these funds is that there will no purchases or redemptions made in these funds post-cut-off time on April 23, 2020. All purchases or redemptions through Systematic Investment Plans (SIP) / Systematic Transfer Plans (STP)/ Systematic Withdrawal Plans (SWP) will also not be allowed henceforth.

Now the fund house will dispose-off the assets of the Schemes and the sale proceeds after the discharge of all liabilities and expenses will be paid to the Unitholders in proportion to their respective interests in the assets of Schemes. The payments to investors in these funds will be done in a staggered manner and could be made monthly or quarterly.

The detail of six funds are

This move may or may not lead to other fund houses following the same. Also, investors invested in this category of funds should check the portfolio of the funds to take any decision of redemption.