Franklin Templeton India has denied a Times Of India story stating that the asset management company was suspending six of its fund-of-funds (FoFs) following the company's shock move to shutter six debt schemes on Friday.
FoFs are mutual funds that invest in other mutual funds.
In reality, FoFs saw Franklin Templeton marking down its exposure to these funds by 50%, as some of their underlying credit risk funds were those that has been wound up by Franklin Templeton on April 23, 2020 and announced on April 24.
The markdown is effective from April 24 until further notice. On April 23, Franklin Templeton shut down 6 credit risk fund schemes citing the redemption pressures it was facing due to the ongoing coronavirus pandemic and the nationwide lockdown.
BOOM's explainer on Franklin suspending the funds can be read below.
Times of India earlier reported that the asset manager was going to shut down six additional schemes in its headline titled - 'Now, Franklin India Suspends 6 More Schemes'. The story was later updated to say, 'Franklin Templeton Marks Down Six FoFs'. The article did not include a correction. Though the article was updated and changed the link of the story still shows the old headline and can be found here.
The story came to light after Franklin Templeton called out the Times of India by a popup on its website and through a tweet. "We would like to clarify that this news item is false & misleading. These schemes remain open for subscriptions", a part of the tweeted clarification reads.
Clarification: TOI article dated April 27, 2020 "Now, Franklin MF Suspends 6 more schemes"— Franklin Templeton (@FTIIndia) April 27, 2020
We would like to clarify that this news item is false & misleading.These schemes remain open for subscriptions.We are pained by this false reporting based on unsubstantiated market rumours
BOOM contacted a spokesperson of Franklin Templeton, who confirmed that the content of the TOI's article was incorrect.
Further, the spokesperson shared with BOOM a document which highlights the markdown.
"Since voluntary redemptions have been suspended in the underlying fixed income funds post cut off time from April 23, 2020, the Valuation Committee decided to provide an illiquidity discount and fair value these fixed income schemes at 50% of their daily NAV as a result of the prevailing illiquidity in these underlying schemes held in the FoFs", it states, and can be found here (triggers download).
The following FoFs have been impacted:
- Franklin India Dynamic Asset Allocation Fund of Funds
- Franklin India Multi-Asset Solutions Fund
Further, all plans under Franklin India's Lifestage Fund of Funds Plan have been impacted, which allocates on the basis of the investor;s age. Four FoFs under this are Franklin India Lifestage Fund of Funds – 20s, 30s, 40s and 50s.
The investment portal of Franklin Templeton also allows potential investors to invest in these funds.
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