Franklin Templeton may take five years to repay investors of closed debt funds, some might get sooner

Franklin Templeton India could take as long as half a decade to repay money to unitholders who had invested in its now wound-up debt mutual funds schemes. In an email addressed to investors the fund house carved out the timeline for returning investor money, reported Bloomberg. Franklin Templeton India on April 23, announced that it will close six of its debt mutual funds schemes, freezing over Rs 30,000 crore of investor’s money. The fund house said that the move was made due to the liquidity crisis emerging in the wake of the novel coronavirus pandemic. The wounding up of the six schemes meant that unitholders were neither allowed to make redemptions or subscriptions.

The email laid out a time-line for payment to investors. The fund house could take more than five years to return the entire investment made in four of the six funds while for the investors of the other two the timeline could be less than five years, Franklin Templeton said in the email. The fund house has also ignited hope that repayments may come sooner if the underlying assets are sold in the secondary markets or the issuer of the assets prepay the amount or accelerate the same.

Franklin Templeton has been functioning in India for the past two decades and has been maintaining in various communications that the underlying assets of the closed funds are good. The asset manager has reiterated that the problem that forced it to close the funds was one that is related to liquidity issues and not one circling around solvency issues. Franklin Templeton India unit was also in the spotlight for the comments made by the global chief of Franklin Templeton, which sounded as if she laid the partial blame on market regulator SEBI for the closing of the funds.

Earlier in a conference call, just after the announcement of the winding up of the six funds, Franklin Templeton had said that investors would not have to wait until all the money in the funds is recovered, the staggered payments to investors in these funds could be made monthly or quarterly. The six credit risk funds that Franklin Templeton closed include —  Franklin India Low Duration Fund; Franklin India Ultra Short Bond Fund; Franklin India Short Term Income Plan; Franklin India Credit Risk Fund; Franklin India Dynamic Accrual Fund; Franklin India Income Opportunities Fund.