InvestorQ : What do you see could be the larger implications of the Templeton recent vote to wind up the six schemes in India?
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What do you see could be the larger implications of the Templeton recent vote to wind up the six schemes in India?

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Rashi Mehra answered.
4 months ago
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Let us look at the next steps first. Firstly, the court will lay down the process but unit holders are going to lose a lot of money. The fund has claimed collections of Rs.13,000 crore against the total outstanding sum of Rs.28,000 crore. That could be misleading as it excludes the unpaid loans, compensation for the interim period and administrative charges.

Most likely, unit holders should be prepared for a haircut of around 40-50% of their capital in this winding-up offer. If it was anything better, the fund would not have been in such a tearing hurry to decide to shut the redemption window overnight. For most unit holders that is still a good bargain as some liquidity is better than no liquidity.

The much bigger issue is on fund accountability. For example, in the case of these six debt funds, clearly it was a case of a debt fund manager playing havoc with the money of unit holders. Fund managers do go wrong on their views and that is part of the risk. But it is crazy to make unit holders pay the price because the fund manager was chasing high returns.

Templeton must not be allowed to hide behind market risk. The fund knows pretty well that this was anything but market risk. It could impact future flows into Templeton fund and that is already visible. Ideally, this should have been used as an opportunity to get to the core of a much bigger problem of how debt funds are managed. Investors have lost their money but the markets could have been made a safer place.

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