The COVID-19 pandemic has led to unprecedented changes in our world. Lockdowns and scaled down business operations have led to a severe disruption in the economy. Businesses fear crashes in financial markets and there is a higher risk aversion along with a liquidity crunch. One such fallout was seen by Franklin Templeton India that directly impacted Indian investors.
On April 23 2020, Franklin Templeton India, the largest Mutual Fund house in the country, made the tough decision to close six, yield-oriented, managed credit funds to protect investor interests. This was in view of market dislocation that impacted the credit sector adversely.
Franklin Templeton entered India more than 25 years ago. It manages one of the most comprehensive ranges of mutual funds catering to varied investor requirements and offers different investment styles to choose from.
The closure of these funds has led to confusion among investors. Franklin Templeton has been transparent in the entire proceedings and kept all avenues of communication open for quick responses.
The President of Franklin Templeton India, Sanjay Sapre had an interactive Video Q & A session with a group of finance bloggers so that the company stand could be made clear and bloggers could put up theirs well as their followers’ concerns.
Mr. Sanjay Sapre started by explaining the market conditions that led to the winding up of the funds to protect value for investors and the way ahead in returning invested money.
The statement was followed by a very interactive Question and Answer session with the participants where a number of concerns were raised and solved by him. Notices and FAQs are available for investors on the company website as well.
The foremost concern was whether the investors were going to get their money back and the time period in which it could be expected to be disbursed.
Mr Sapre explained that winding up of schemes did not mean that the money was lost. In fact, they were making an all out effort to return investor monies at the earliest instance.
A few participants enquired about the market conditions under which the funds had to be closed. There had been rumours that Institutional investors had an inkling of the impeding closure. Many asked if the investors had been adequately warned of the risks involved in investing.
Mr. Sapre discussed the market circumstances that led to this difficult decision of winding up funds but it had been done to protect value for investors. He also explained that a lot of rumours were doing the rounds in the markets and they were committed to sending out the right communication.
The investment scenario at the moment is considered risky. People sought to understand if it was the right time to invest anew and what could be the avenues for that.
Mr Sapre explained the various kinds of Mutual Funds and how individuals can choose to invest as per their personal financial goals.
It was also asked whether the Mutual Funds are insured for uncertain market conditions to which he responded that Mutual Funds are always subject to market risks.
The way forward was discussed in great detail. Investors asked how the process of disbursement would happen and if there was a way to accelerate it. Many people wanted to know the maturity periods of these funds.
Mr. Sapre explained the process of disbursement and how they were trying to return these monies well in advance if the maturity dates of underlying securities.
There was a doubt in the minds of investors if Franklin Templeton would change their portfolio selection post the pandemic. It was explained that Franklin Templeton’s equity schemes would remain unaffected and are managed by their experienced team in line with their fund management philosophy.
The role of RBI in bailing out and announcing a relief package to improve market liquidity was also discussed.
Large companies defaulting on debts and basic governance issues came to the fore during the discussion.
People also asked Mr. Sanjay Sapre what was Franklin Templeton’s strategy in dealing with the fake news being circulated in the media. Mr Sapre explained that clear communication, speedy response to queries and outreach in forums went a long way in rebuilding investor confidence.
Franklin Templeton has also started a podcast series to address investor concerns. You can watch President of Franklin Templeton, Sanjay Sapre explaining the closure of funds and the way ahead here:
The discussion closed on an optimistic note with most of the doubts of the participants being clarified.