On 23rd April 2020, Franklin Templeton wound up six credit risk funds with total assets under management of Rs 25,856 crore, as they were facing redemption pressure. Change in guidelines will apply to all MFs wrapping up their plans under SEBI standards.
The mutual fund house Franklin Templeton Mutual Fund on Friday said winding up of schemes was the only way to go amid lack of liquidity in the debt market and unprecedented redemptions in the yield-oriented schemes. The fund house on Thursday announced the closure of six debt fund schemes with effect from April 24, Friday, with total assets under management of Rs 25,852 crore. The schemes that are winding up are Short Term Income Plan, Ultra Short Bond Fund, Income Opportunities Fund, Dynamic Accrual Fund, Credit Risk Fund, and Low Duration Fund. On 20 May, SEBI modified its regulation, permitting MFs to list their plans that are in the process of winding up.
Separately, Franklin Templeton’s trustees on Wednesday hired Kotak Mahindra Bank to help monetize the portfolio of its shuttered credit risk funds. “The trustees have named Kotak Mahindra Bank, who, through its obligation capital markets group, will work intimately with the Franklin Templeton trustees, to help with all portfolio activities in these six plans that are being shut” said asset manager.
The units of the plans that are being twisted up can be recorded on stock trades and the investors can exit through this instrument. This procedure will be followed tentatively for every single shared store which proposes to wrap up their plans under SEBI guidelines. During the process, the fund house will not be allowed to buy or sell any unit. “According to Mutual Fund guidelines, there are a few stages envisaged regarding ending up of mutual fund schemes before the plan stops to exist. During this procedure, such units can be recorded and exchanged on a perceived stock trade, which may give an exit to investor” says SEBI in the circular.
By posting, exchanging on the stock trade component won’t be obligatory for investors. The investors are allowed to decide on this channel as an exit or trust that the AMC will finish the whole portfolio monetization/liquidation and discount process. The operational steps for settlement and trading of these units will be decided by the market regulator and the exchange on which these units will be listed.
