Franklin Templeton wind-up 6 debt funds. Why?

The important decision by Franklin Templeton to wind-up 6 yield oriented debt funds has changed Indian mutual funds industry. On April 23 announced decision to wind-up six debt schemes because of strong redemption pressure during the lockdown and quarantine.

On April 20, 2020 grand total corpus stands on 26,779 Cr. In last 1.5 year six schemes invested amount reduced from 47,658 Cr. Such a drastic reduce happened because liquidity crisis in the shadow banking space and default by IL&FS. The impact of Franklin Templeton’s decision will be though to overcome because of luck of trust from investors. Company did not provide any specific timeline when investors could expect to get back their investments.

 “As per the communication, the intent is to wind up in less than a year but only 26% of the portfolio will mature in the next year. If the market does not resume normalcy, it will be difficult to sell illiquid papers,” suggests the B&K Securities report.

Mutual funds provide higher returns but also provide higher risk. I do believe that it’s better to invest your money by yourself without help of any mutual funds.

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