InvestorQ : What happens to Franklin Templeton unit holders after the latest Karnataka High Court order?
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What happens to Franklin Templeton unit holders after the latest Karnataka High Court order?

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7 months ago
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In its latest order, the Karnataka High Court has instructed Franklin Templeton Mutual Fund not to wind up the six funds without getting the prior consent of the unit holders. It may be recollected that on April 23rd, Templeton had summarily shut down 6 of its debt schemes.

These six debt funds had a combined AUM of over Rs.28,000 crore and the move was unprecedented in Indian mutual fund history. While the stated reason was that they were shut due to illiquidity issues, the actual reason was that fund managers had played ducks and drakes with investor’s money.

The truth was that the fund had invested low duration and medium duration fund corpus in high risk instruments that were illiquid and when they could not get an exit, they opted to wind up the fund and keep it in suspended animation. Even today, the haircut is over 70%.

The Court has observed that it was open to the idea of the trustees obtaining consent of the unit holders and taking further action. Now, Templeton plans to take up the order from a legal perspective, but clearly Templeton appears to be acting only to buy time and drag the case along. Templeton must be made liable at an AMC level.

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