Subject: Clarification on media reports about our funds
Dear Investor,
I am personally writing to you today, to address
some immediate concerns created by some well-intentioned but factually
incorrect reporting across various media channels. Let me provide some
clarifications point by point:
1: Reported: Winding up of the schemes means that my
money is lost
Fact:This is factually incorrect. We have
communicated the reasons and market circumstances that led us to take this
extremely difficult decision which was taken purely to protect value for our
investors. As the schemes liquidate portfolio holdings subject to market
conditions, receive coupon payments and scheduled maturities, the Trustees will
start to return monies to investors at the earliest instance in compliance with
regulation 41(2)(b) of SEBI (Mutual Fund) Regulations 1996.
2: Reported: The schemes invested in risky, unrated
papers
Fact: The schemes followed a consistent investment
strategy of investing in investment grade papers across the credit rating
spectrum, that is to say, from AAA through to A rated papers. This strategy
served the schemes and its investors well till recent times. The schemes were
able to generate significant cash flows even during the last 6 months which
were more turbulent times for the credit markets. For example, the schemes were
able to generate significant cash from the portfolio holdings, a majority of
that from papers rated AA and below.
3: Reported: The liquidity problem is not related to
the Covid-19 pandemic
Fact: These schemes followed a consistent strategy
of investing across the credit rating spectrum and have done so for many years,
and across multiple market cycles. The schemes have been able to manage through
these cycles and provide daily liquidity. Many of these schemes have been in
existence for more than 10 years with a similar strategy. The current Covid-19
pandemic created a severe market dislocation particularly for the types of
investments that these schemes hold, though the issue of lack of risk
appetite,reduced volumes and illiquidity for corporate bonds was a broader market
issue. The inability of the schemes to meet daily redemptions was a direct
result of the market situation created by the COVID- 19 pandemic as well as the
extended lock-down.
4: Reported: The schemes will not be able to return
investor monies for an extended period of time
Fact:Each /scheme has its own maturity profile and
in general, shorter duration schemes will be able to return monies to investors
faster. The schemes will receive regular coupon payments and maturities. In
addition, the schemes will explore all opportunities to monetize the underlying
assets in the portfolio, without resorting to any distress sales, such that it
can return investor monies at the earliest possible time. It will be the
endeavor of the schemes to return these monies well in advance of the maturity
dates of the underlying securities.
5: Reported: We should be redeeming our monies from
all other Franklin Templeton schemes as these could also be wound up
Fact: The decision to wind up our suite of six
yield-oriented schemes was an extremely difficult one and taken only to protect
investor interest. It was not a situation in which we hoped to find ourselves.
We also recognize this has impacted liquidity for our investors but was
necessary in order to preserve value for our unitholders.
Our other fixed income schemes which are open for
subscription and redemption, primarily invest in highly liquid securities such
as Government Securities, AAA rated bonds or other cash and cash equivalents.
These portfolios have the necessary ability to generate liquidity in order to
meet redemptions. We have already generated a significant amount of liquidity
in these portfolios to meet any redemption requests we may receive.
Our equity schemes remain unaffected and continue to
be managed by our experienced and tenured team based in Chennai in line with
their investment mandate and fund management philosophy.
6: Reported:
Franklin Templeton is winding up its business in India
Fact: Franklin Templeton has been an early and
patient investor in India. We have worked to build a long-term business in
India over our 25+ year history here. This is also reinforced by the fact that
over 33% of our global workforce is based in India. As affirmed by our global
CEO, Jenny Johnson, Franklin Templeton’s commitment to India remains steadfast.
We are committed to doing all we can to return monies in the schemes that are
wound up at the earliest to investors, and to regain your trust in our brand.
This extraordinarily difficult decision to close six
of our schemes in a category that we helped create, was taken as it was the
only viable option to preserve value for our investors in the current
unprecedented environment.
I hope this note serves to bring you some comfort
regarding your investments with Franklin Templeton, whether in the schemes that
are wound up, or in our other schemes that continue to be open for
subscriptions and redemptions.
I remain committed to bringing you regular updates
to help answer your most urgent and important queries.
Thank you.
Sincerely,
Sanjay
------------------
Sanjay Sapre, President, Franklin Templeton Asset
Management (India) Pvt. Ltd.
Disclaimer
The information contained in this communication is
not a complete representation of every material fact and is for informational
purposes only. Statements/ opinions/recommendations in this communication which
contain words or phrases such as “will”, “expect”, “could”, “believe” and
similar expressions or variations of such expressions are “forward – looking
statements”. Actual results may differ materially from those suggested by the
forward-looking statements due to risk or uncertainties associated with our
expectations with respect to, but not limited to, exposure to market risk,
general economic and political conditions in India and other countries
globally, which have an impact on the service and / or investments. There may
have been changes in matters which affect the security subsequent to the date
of this communication. The AMC, Trustee, their associates, officers or
employees or holding companies do not assure or guarantee any return of
principle or assurance of income on investments in these schemes. Please read
the Scheme Information Document carefully in its entirety prior to making an
investment decision and visit our website http://www.franklintempletonindia.com
for further details.
Mutual Fund investments are subject to market risks,
read all scheme related documents carefully.
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