Franklin Templeton winds up its India debt funds; here is what it means for investors

Franklin Templeton Mutual fund on Friday decided to wind up six of its debt schemes in India with effect from April 23, 2020, amid the COVID-19 crisis. Capital up to Rs 308 billion is locked in and now the company hopes to sell its assets and pay its investors. 

It announced that it will be shutting down its Low Duration Fund, Dynamic Accrual Fund, Credit Risk Fund, Short Term Income Plan, Ultra Short Bond Fund and Income Opportunities Fund.

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The company in a statement said that due to the effects of COVID-19, debt markets around the world including India are bleeding red. 

The company on Thursday said that winding up the funds is the “only viable option to preserve value for investors and to enable an orderly and equitable exit” for all unit holders, the asset manager.

“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 lock-down of the Indian economy,” it added.

 What does this mean for you as an investor? 

There are high chances that your money will be returned not any time soon but at a later stage as the process of winding up is long and may take time before the debtors can clear their dues and return the money. 

Secondly, the assets of the company may not yield the desired results and the company may not get the amount to repay the investors. This could be a long haul for which the investors need to be prepared for. 

Lastly, any legal proceedings before any authority may delay the process of returning your hard-earned money.

However, if the situation improves the investors will not have to wait for too long.

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