InvestorQ : Why exactly has Franklin Templeton suddenly decided to wind up so many debt funds without informing anyone in advance?
Deepa Salunkhe made post

Why exactly has Franklin Templeton suddenly decided to wind up so many debt funds without informing anyone in advance?

Answer
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Juvina Maggie answered.
5 months ago


On April 23rd, Franklin Templeton India announced the winding up of six of its debt funds. All these funds had one thing in common; they were all credit risk funds. The total AUM of these 6 funds is in excess of Rs.28,000 crore and constitutes 25% of the AMC’s total AUM. It needs to be understood that this winding up of 6 funds by FT group is like any other liquidation of assets. All the debt instruments owned by these six funds would be gradually and systematically sold by the trustees who are appointed as administrators of these funds. Once a winding up notice is given by the fund, then effective from 24th of April all fresh purchases and redemptions in these six funds have automatically come to a halt. Also, the payout to the unit holders will not be immediate but will happen over a period of time on a proportionate basis. That means if the fund is able to realize a value of just 40% of the value of the bonds from the issuers, then that is what the debt fund investors will get. The urgency with which the funds were wound down points to a larger capital risk! Templeton has spoken about illiquidity and redemption pressure but clearly there are serious asset quality issues.