On April 23rd, Franklin Templeton India announced the winding up of six of its debt funds. The common thread among all these funds was that they were all debt funds. These six funds would entail the winding up of 14 segregated fund portfolios. The total AUM of these 6 funds is a little over Rs.28,000 crore and accounts for 25% of the total AUM of the Franklin Templeton AMC in India.
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FT has added a new dimension of risk to Indian debt funds
On April 23rd, Franklin Templeton India announced the winding up of six of its debt funds. The common thread among all these funds was that they were all debt funds. These six funds would entail the winding up of 14 segregated fund portfolios. The total AUM of these 6 funds is a little over Rs.28,000 crore and accounts for 25% of the total AUM of the Franklin Templeton AMC in India.
What this winding up entails?
The winding up of the 6 funds by the 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! This also means that any SIPs on these funds would automatically be cancelled and the same would apply to any SWPs on these funds. The fund house is yet to clarify on time lines but that will await unit holder approval.
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