Franklin Templeton Mutual Fund has shut six of its open-ended debt funds, effective April 23.

The six schemes are as follows:

- Franklin India Low Duration Fund (FILDF),
- Franklin India Dynamic Accrual Fund,
- Franklin India Credit Risk Fund,
- Franklin India Short Term Income Plan,
- Franklin India Ultra Short Bond Fund, and
- Franklin India Income Opportunities Fund (FIIOF).

 All these schemes followed the high-risk, high-return credit risk strategy. The fund house will
now sell the underlying securities of all these funds over time and pay off their investors in a
staggered manner.

 “In light of the severe market dislocation and illiquidity caused by the COVID-19 pandemic, this
decision has been taken in order to protect value for investors via a managed sale of the
portfolio,” Franklin Templeton declared in a statement on April 23

 India’s financial sector is under intense strain, grappling with a crushing liquidity crisis. Due to
the uncertainty, investors began to panic and took to redemption, especially in credit risk funds
such as the ones run by Franklin Templeton

 To meet redemptions, a fund house typically dips into cash reserves or sells underlying scrips.
Even that wasn’t enough, according to Templeton, which forced it to take the decision to wind
up the six funds.

 These six schemes put together are estimated to have an AUM of Rs 28,000 crore . The wind-
down is similar to a lockdown. These schemes will not allow any further transactions. In other
words, there will be no purchases just as there will be no redemptions.

 The day the fund houses get any interest or maturity from any of the holdings, it will distribute
to investors. Additionally, as and when the fund house can get a fair value of it’s investments in
the secondary market, they will do that too. That means As and when the underlying portfolio
instruments mature or the scheme receives the money back, Franklin Templeton will pay it
back to investor.