Franklin Templeton was having trouble with six of its debt funds. Then these six debt funds were wound up in April 2020. Many investors are worried about what’s going to happen with their money. I wrote a post about it you can read it here.
Franklin Templeton has 25 years history of working in India. They understand that if they don’t work through this, and get back the investor confidence, then there’s going to be a problem. Trust is the most significant equity when it comes to any business.
That’s why they are trying to move quickly to resolve this issue as soon as possible. As a first step, Franklin Templeton announced an E-voting for the unitholders and a virtual meeting. The voting was to commence from June 9th to June 11th and unitholders virtual meeting on 12th June 2020
But twist in the story.
The Gujrat high court in an order dated 8th June has suspended voting and any action forward until the next hearing scheduled for June 11th.
According to SEBI guidelines, the Unitholders need to vote before funds can be formally wound up. The majority vote decides the next course of action. In case there is no majority, the trustees then take it forward.
The question here is, what now?
The courts are involved, so we must wait and see.
With so many financial troubles everywhere, something like this is making investors jittery. Why do things like this happen, and how can we protect ourselves?
I like reading Jagoinvestor, money control, and valueresearchonline when it comes to many financial decisions. But at the end of the day, it’s my money and my risk. So, when you invest, it’s your money, take care to read all offer documents carefully. Check whether there are troubled bonds or shares from companies who are not doing well.
I am not into short term investing at all, so that’s for experts to discuss. But when it comes to long term investing, I check the funds and always prefer direct funds over anything else. Don’t ask me why it’s just me, I guess!
Now, what happens when the process of e-voting starts?
In a briefing by the President of Franklin Templeton, Mr.Sanjay Sapre, it was clarified, that the link for joining this e-voting will be sent to the unitholder’s registered email ID. In case you haven’t informed Franklin Templeton about your registered email ID. It will be sent to your registered mobile number. If you want to register your email ID with Franklin Templeton(that’s where most of the information will be sent), you can do that.
You should check their website for further updates. Once the voting process is over, Franklin Templeton will be going forward with the active monetization of these debt funds. That will start the process of giving back investors their money.
Until the voting is completed, the next course of action cannot be taken. The first phase of returning money to the investor should start four to six weeks from that time. According to SEBI regulations, until the E-voting by the unitholders is done, the active monetization for getting back the money of the investors is delayed. But between that and getting the money is a long road for investors.
Until then, the funds are locked in.
When Sanjay Sapre,President of Franklin Templeton was asked the lesson that Franklin Templeton learned,
He said they planned to make the process more transparent.
The upside of all this is now the fund houses are working round the clock to fix the problems inherent in high credit risk funds. Especially the short and ultra-short duration funds seem to fall in the no man’s land. The credit quality specifications for many debt category funds seem to be a grey area where no one is shedding light.
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3 things I want as an Investor going forward
I want more transparency about where the money is being invested
I want to know who the big investors in a fund are?
What is their redemption pattern?
If SEBI doesn’t step up with more checks and balances, there’s no turning back.
I am not an expert on financial asset management. This is an opinion piece. I am not a qualified Financial Advisor and this is not to be taken as professional financial advice. Mutual funds are subject to market risk, read all scheme-related documents carefully. All investments should be done after consultation with a financial suitable expert, according to own financial risk appetite.
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