Franklin to investors: Vote for orderly closure of funds – Times of India

MUMBAI: Franklin Templeton MF on Monday warned investors in six of its debt funds, which are facing closure, that they may suffer heavy losses if they do not vote to wind up these schemes. Under the directions of the Supreme Court, the fund house has sent notices to about 3.3 lakh investors of these schemes to vote if they want closure or not. The trustees of the fund house need a simple majority to close down these six schemes. Investors in each scheme have to separately vote to decide on the fate of the scheme.
On April 23, the fund house had decided to close these schemes when they were facing huge challenges in meeting redemptions from investors. The reason was that, after the nationwide lockdown in late March, liquidity in the country’s debt market had dried up and very few trades were taking place.
“The trustee believes that it will be beneficial for unitholders to vote ‘Yes’ to the proposed resolution. The trustee is of the view that an orderly liquidation would maximise the value of the portfolio assets for distribution of cash to (investors) on a pro-rata basis,” a release from the fund house said. “There is a greater likelihood of realising fair value from the investments within a reasonable period of time,” it noted.
“If the decision to wind up the schemes in an orderly manner is not implemented, it would precipitate a rush of redemptions, which would force a distress sale of the portfolio securities, likely resulting in a reduction in the net asset value (NAV) of the schemes and substantial losses for (investors),” it warned.
In case a majority of investors decide to wind up a scheme, then they will need to again vote on who should be authorised to start the winding-up process. It could be the trustees or some other entity, which would be decided by the investors again, the release said. According to Sanjay Sapre, president of Franklin Templeton – India, the opportunity to liquidate assets at fair value will increase with time in a normal market environment. However, “an orderly winding-up does not mean a lengthy wait for return of monies”, he said.
In April, when the fund house had declared a closure of these six schemes, the total assets managed by these fund managers was nearly Rs 25,900 crore from about 3.3 lakh investors. On December 3, Sapre, in an update to investors, had said that four of the six funds — low duration, ultra short bond, dynamic accrual and credit risk — together had Rs 7,226 crore ready to be distributed to investors. The other two funds — short-term income and income opportunities — had total borrowings of about Rs 367 crore, he said.

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