Covid-19 crisis: Franklin Templeton voluntarily...

Covid-19 crisis: Franklin Templeton voluntarily winds up six credit funds

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Mumbai: Franklin Templeton Mutual Fund said on Thursday it has voluntarily decided to wind up its suite of six yield-oriented, managed credit funds, effective April 23, citing the severe market dislocation and illiquidity caused by the Covid-19 pandemic.

These six funds are: Franklin India Low Duration Fund, 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.

“In light of the severe market dislocation and illiquidity caused by the Covid-19 pandemic, this decision has been taken in order to protect value for investors via a managed sale of the portfolio,” Franklin Templeton said in a late evening release.


The fund house said this action is limited to the mentioned funds, which have material 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.

It clarified that all other funds managed by Franklin Templeton Mutual Fund in India – equity, debt and hybrid – are unaffected by this decision.

“The decision to wind up these funds was an extremely difficult one, but we believe, it is necessary to protect value for our investors and presented the only viable means to secure an orderly realization of portfolio assets,” said Sanjay Sapre, President, Franklin Templeton – India.


“Significantly reduced liquidity in the Indian bond markets for most debt securities and unprecedented levels of redemptions following the Covid-19 outbreak and lockdown has compelled us to take this decision,” he added.

“While these funds are getting wound up, accruals into these funds should continue in the same way as now, as the underlying securities held by these funds remain sound,” Santosh Kamath, CIO, Franklin Templeton Fixed Income India, said.




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Tweet Thread on what just happened to Franklin Templeton Funds – Credit Risk Funds

First – Franklin Templeton today announced the winding down of SIX of its Debt Funds (which had credit risk)

This is effective tomorrow i.e. 24th April 2020

This is an unprecedented move
(1/n)  
Which are these Funds?
These Funds are  

Franklin Low Duration
Franklin Dynamic Accrual
Franklin Credit Risk Fund  
Franklin Short Term Income
Franklin Ultra Short Bond
Franklin Income Opps Fund

All these funds have been wind down with immediate effect
(2/n)  
What happens to my investments in this wind-down? They will return my money?

Ans: This wind-down is similar to a lock-down

These schemes will not allow any further transactions, no purchases, no redemptions

It’s like the entire scheme becomes a segregated portfolio

(3/n)  
Whoa! What do you mean? Tell me more clearly

These six schemes put together as of date have an AUM of Rs. 28,000 cr. This entire AUM is now stuck as it is. You cannot redeem

What do u mean, I cannot redeem?
Simply put, you cannot withdraw any monies

(4/n)  
Cmon don’t joke, my money is stuck till how long?

Ans: It’s not a joke. Here;s the formal notice from Franklin Templeton
(5/n)  
So u mean, my money is gone? They will never open these schemes

Ans: Yes, the schemes are wound down. They will never open again

It will work like a segregated portfolio i.e. the day they get any interest,, maturity from any of the holdings it will distributed to all  

(6/n)  
So I will get my money back soon?

Ans: As and when the underlying portfolio instruments mature or the scheme receives the money back (in case interest or defaults etc) they will pay it back to you.  

So that’s that simply put. Any specific Qs will be happy to answer

(7/n)  

Source

20 Comments  |  
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This is extremely sad and this will create ripple across all debt funds and MF might even cause crisis. I received heaps of fwds warning to redeem all funds

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That is why it is necessary to understand the product you are buying.
They had -17% cash position some time back (someone on twitter pointed out). This was supposed to happen.
Ripple effect can be dangerous. They are the biggest buyers of nbfc’s debt. Situation just seems to get worsen.

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dummyuser wrote:

This is extremely sad and this will create ripple across all debt funds and MF might even cause crisis. I received heaps of fwds warning to redeem all funds

I never received any whatsapp forwards. Can you let me know some whatsapp groups where such foresight / predictions are circulated?

Unfortunately I moved all my FD to FT debt fund few months back. Looks like I will die poor and in pain sad

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Budhe-Baba wrote:

I never received any whatsapp forwards. Can you let me know some whatsapp groups where such foresight / predictions are circulated?

Unfortunately I moved all my FD to FT debt fund few months back. Looks like I will die poor and in pain sad

Dying poor is irrelevant, living poor is a problem.

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Budhe-Baba wrote:

I never received any whatsapp forwards. Can you let me know some whatsapp groups where such foresight / predictions are circulated?

Unfortunately I moved all my FD to FT debt fund few months back. Looks like I will die poor and in pain sad

It is more to do with the redemption and liquidity. It is like whenever the funds mature/interest paid they will keep paying out. Returns might not be good because they wont be actively managing the fund. Unless there are defaults you should get principal at least with some returns. Not everything is lost

https://www.moneycontrol.com/news/business/comp...

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cocay wrote:

Dying poor is irrelevant, living poor is a problem.

I am already living poor. Some days I eat roti with ghee only. No sabzi. flushed

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rsai01 wrote:

It is more to do with the redemption and liquidity. It is like whenever the funds mature/interest paid they will keep paying out. Returns might not be good because they wont be actively managing the fund. Unless there are defaults you should get principal at least with some returns. Not everything is lost

https://www.moneycontrol.com/news/business/comp...

Yes I understand. But observe this: They had AAA papers few weeks ago. But obviously many big shots (politically well connected) came to know about this decision much earlier than today (insider information) and they redeemed their investment. To fund these redemptions, FT sold all their AAA papers and now all we have left are AA- and even C quality papers.

This is what happens in India.

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Budhe-Baba wrote:

Yes I understand. But observe this: They had AAA papers few weeks ago. But obviously many big shots (politically well connected) came to know about this decision much earlier than today (insider information) and they redeemed their investment. To fund these redemptions, FT sold all their AAA papers and now all we have left are AA- and even C quality papers.

This is what happens in India.

This happens everywhere.. see recent US stock market sellout by politicians..

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Mutual fund shahid hai

Thanks to @marketdimer i redeemed my UST fund fully (dec-Jan).

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Shahskm wrote:

Mutual fund shahid hai

Thanks to @marketdimer i redeemed my UST fund fully (dec-Jan).

Link to thread please do that i don’t make serious mistakes in future?

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Budhe-Baba wrote:

I am already living poor. Some days I eat roti with ghee only. No sabzi. flushed

Ping me your paytm number, we will contribute for Budhe Care Fuq

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_One_Miller_ wrote:

Ping me your paytm number, we will contribute for Budhe Care Funq

Haha, Thanks for your concern, but no i will not accept. There are people who are dying on streets. You can help them instead.

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People don’t even understand the difference between debt funds & liquid funds investing in treasury papers & still decide to invest in these debt funds because of a bit higher return. That is why I never recommend anybody a debt fund until I make that person understand the difference between a debt fund & a liquid fund invested in treasury papers. Also once the person understand they rarely choose debt fund or even liquid MF over regular savings acc/fd.
@Awake @BubbleBoyChickenLittle @bikidas2060

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Budhe-Baba wrote:

I am already living poor. Some days I eat roti with ghee only. No sabzi. flushed

I eat last night की रोटी with ghee on it and a bit लाल मसाला. With some tea. Works fine. This and Poha are my 2 major breakfast options.
Lol, that’s not poor living. That’s simple living. relieved

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guest_999 wrote:

People don’t even understand the difference between debt funds & liquid funds investing in treasury papers & still decide to invest in these debt funds because of a bit higher return. That is why I never recommend anybody a debt fund until I make that person understand the difference between a debt fund & a liquid fund invested in treasury papers. Also once the person understand they rarely choose debt fund or even liquid MF over regular savings acc/fd.
@Awake @BubbleBoyChickenLittle @bikidas2060

People like complicated things. relieved

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Budhe-Baba wrote:

Yes I understand. But observe this: They had AAA papers few weeks ago. But obviously many big shots (politically well connected) came to know about this decision much earlier than today (insider information) and they redeemed their investment. To fund these redemptions, FT sold all their AAA papers and now all we have left are AA- and even C quality papers.

This is what happens in India.

Their AUM was falling and had cash borrowings. U should check their website daily in days like these.
Follow good people on twitter. Many warned against this some time back.

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Awake wrote:

Their AUM was falling and had cash borrowings. U should check their website daily in days like these.
Follow good people on twitter. Many warned against this some time back.

Recommend some twitter people please.

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Now I gradually am understanding why people asked me not to invest in MF and said stock market when invested carefully is far better than MF smile

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Gaurav_G wrote:

Now I gradually am understanding why people asked me not to invest in MF and said stock market when invested carefully is far better than MF smile

It is not like that, MF are still far better than direct investment in shares. Anyone who say direct investment in shares is better is either an expert already earning in 5 figures from his share investment or a novice yet to lose 5/6 figures amount in share investment, no in between.

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