In an unprecedented decision, Franklin Templeton Mutual Fund (MF) on Thursday decided to shut six of its open-ended debt schemes oriented towards high-yield investments citing continued redemption pressure and lack of liquidity in the debt markets amid the lockdown and the coronavirus pandemic. All these schemes followed the high-risk, high-return credit risk strategy. According to industry sources, Franklin Templeton MF had over Rs 3,000 crore of borrowing. The fund house will now sell the underlying securities of all these funds over time and pay off their investors in a staggered manner.
“Due to the on-going novel coronavirus or COVID-19, pandemic, liquidity in the bond market has dried up. Yields of debt securities have risen sharply and that has materially diminished the abilities of companies to service their debt. Mutual funds have also been getting a lot of redemption requests. We felt it best under these circumstances to wind up these funds and return the money to investors,” Sanjay Sapre, President, Franklin Templeton – India, said.
These six schemes are:- Franklin India Low Duration Fund (FILDF),
- 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 (FIIOF).
Franklin Templeton debt schemes shut: All investors need to know
- As the Franklin Templeton debt schemes have been wound up, investors in these schemes will not be able to withdraw their money, immediately or on their own. In fact, they will have to wait almost as long as the duration of the underlying scheme.
- As Templeton debt schemes have closed subscriptions and redemptions, your systematic investment plans (SIP) will stop automatically.
- If you had enrolled for systematic transfer plans your money is stuck. Your STP has just gone for a toss as the transfers to your equity funds will now not happen.
- Investors will no longer be allowed to make fresh purchases or sales from these funds. The systematic plans, including systematic investment plans, systematic transfer plans and systematic withdrawal plans will also be suspended.
- Franklin Templeton said you will not have to pay any exit load. However, you will be liable to pay tax on any gains you have made in the schemes when the money is returned.