New Delhi: In an unprecedented move, Franklin Templeton Mutual Fund has voluntarily decided to wind up its six debt schemes citing redemption pressure and lack of liquidity in bond markets due to coronavirus pandemic.
This is the first instance when a fund house is shutting its schemes because of coronavirus related situation.
These six funds are Franklin India Low Duration Fund, 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.
"There has been a dramatic and sustained fall in liquidity in certain segments of the corporate bonds market on account of the COVID-19 crisis and the resultant lockdown of the Indian economy which was necessary to address the same. At the same time, mutual funds, especially in the fixed income segment, are facing continuous and heightened redemptions," Franklin Templeton MF said in a late evening statement on Thursday.
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The statement further noted that "an event has occurred, which requires these schemes to be wound up and that this is the only viable option to preserve value for unit holders and to enable an orderly and equitable exit for all investors in these unprecedented circumstances.
Market participants are concerned that the current situation may also impact other debt schemes.
Markets regulator Securities and Exchange Board of India (SEBI) on Thursday eased the valuation policies for debt mutual funds and asked them not to term a paper as default if the delay in payment of interest or extension in maturity is mainly due to coronavirus pandemic related lockdown.
AMFI assures investors after Franklin Templeton MF shuts six schemes
Industry body AMFI on Friday said the winding up of debt schemes by Franklin Templeton Mutual Fund is an isolated event and assured investors that their investments in debt schemes are safe.
The industry body assured investors that majority of fixed income mutual fund assets are invested in superior credit quality securities and such schemes have appropriate liquidity to ensure normal operations.
In a concall, AMFI Chairman Nilesh Shah said, winding up of schemes by the fund house is an isolated event and will have no bearing on other mutual funds and assured investors that their investments in debt mutual fund schemes are safe.
Shah further noted that many mutual funds have independently informed that they don't have any outstanding borrowing.
He said that liquidity, maturity profile and credit quality for debt funds are appropriate for day-to-day operations to continue uninterruptedly.
The industry body has strongly recommended that investors should continue to focus on their investment goals, consult their financial advisor and not get side-tracked by an isolated event in a few schemes of one fund company.
(PTI Report)
