Have Franklin Templeton mutual fund investors got closure?
investors in the six closed debt schemes of Franklin Templeton India Asset Management Company (AMC) is finally over. With the payment of the latest tranche by Franklin India Short Term Income Plan, all six funds have now paid back over 100% of the AUM (assets under management) prevailing at the time of their sudden winding up on 23 April 2020. The units in all six funds now stand extinguished, with orderly liquidation of all performing assets.
Having got their money back, investors can finally breathe easy. However, before the chapter closes on this saga, we revisit the manner in which the entire episode played out, the learnings for all stakeholders, and why the outcome doesn’t quite deliver a clean chit to the AMC.
Soft landing achieved
Investors were left shaken when Franklin Templeton took the unprecedented decision to wind up six of its debt funds on 23 April 2020. A crippling market dislocation, fed by the onset of the Covid pandemic, had sucked out liquidity from the funds’ underlying holdings.
Facing a wave of redemptions from anxious investors, the fund house was staring at the unpleasant scenario of undertaking a fire sale of its securities. The only way out to preserve value for investors was to down the shutters. “The decision to close the funds was taken in the best interests of unit holders as a result of the severe market dislocation caused by the Covid-19 pandemic.
This voluntary decision was taken with the sole objective of preserving value for unit holders via a managed sale of all fund portfolios,” stated Franklin Templeton AMC, in its note, at the time.
