Thread by @ankitkumargarg

Franklin has shut down 6 debt mutual fund schemes due to illiquidity in market stopping buy/sell of units in these funds. Doesn't it put q on experts who suggest to hold just 3-4 scheme in portfolio. True saying - Never keep all eggs in one basket. #mutualfunds #market #franklin

Put together, almost 26000 crore rupees of investors are stuck in these 6 schemes. These all belong to debt schemes so higher chances that most of the money stuck belongs to retail investors. (2/n)

All these 6 funds are rated with 5 stars by Morningstar rating agency. In 2008 crisis all mortgages and CDO were triple ace rated by S&P, Moody's & Fitch. History repeats itself and average customer is trapped. Sad story #MutualFundsSahiHai ? #franklintempleton #mutualfunds (3/n)

Going to the cause of this collapse, it seems like there have been continuous ignorance of risk factors. First in Jan 2020, these funds created seg. portfolio for Voda-Idea securities. Read here
m.economictimes.com/mf/mf-news/seb… (4/n)

@FTIIndia Franklin Templeton has also invested in Andhrapradesh Capital Region Development Authority securities which is left hanging in mid by new govt and lockdown. Read here: newindianexpress.com/states/andhra-… (5/n)

Coming to the illiquidity point, ST Income Fund had Rs 1,255 cr (17.7% of total fund) as negative cash bal on 31/03/20.
Low Duration Fund had Rs 347 cr (12.7%), while the Ultra Short Bond Fund had Rs 783 cr (7.1%). Have a look at some other funds with red flags: (6/n)

Franklin Templeton has announced a investors call which is ongoing. (7/n)

Here os Live thread of call

Sanjay Sapre-
- Six funds voluntary wound down
- This was only way and the most difficult choice
- COVID has led to significant reduced liquidity in debt markets
- and also higher redemptions
(Courtesy @NagpalManoj)
(8/n)

Mr Anand (heading Equity funds)
- all other funds are safe
- margin safety is high
- equities are at cheap valuation
- people should continue investing in it (9/n)

Mr. Satish-
- it is in best interest of customers
- financial market depends on economic conditions
- it all started with covid issues
- we have seen many bad cycles and came through
- current situation is bigger problem as we don't know when we will plan out of it.
(10/n)

- there is global problem
- risk appetite has been degraded
- liquidity in system, increasing in buying are required, rbi has to help
- untill it comes back, we can not function normally
- RBI is taking measures but insufficient
- for success economy has to be improved (11/n)

- when redemption happen there r two ways. Either borrow or sell bonds
- its tough to sell enough so we have to borrow
- but this will sustain only if know how many days it will continue
- otherwise it will continue increasing risk
- either we can wait or have to stop (12/n)

By Mr Santosh*

- the money will come on maturity
- or we have to sell maturity
- we shall keep selling the papers
- we don't want to sell in hurry
- we have taken this measure so that we can sell in orderly manner when market normalise (13/n)

- whenever money will come back either by cash flow or maturity sale, it will go back to investors
- we are waiting for normalisation of market
- in short term funds, money will come faster due to short term maturity #franklintempleton
#MutualFundsSahiHai ? (14/n)

Mr Sanjay-
- Call is being recorded and will be made available shortly.
#FranklinMF #FranklinTempleton (15/n)

Mr Sanjay
- Liquidity will arise after unlocking
- cont of fund was impacting investors due to cont. borrowing and sell on bad value
- We will return AS MUCH AS POSSIBLE
- this is outcome of protecting value for the investors who wanted to remain invested (16/n)

Mr. Vivek-
- We r committed to the business
- we have always generated huge values 4 investors
- we have long term good record
- purpose of winding up is generating maximum value for inv.
- several different investment teams are working independently #FranklinPaisaVapasDo
(17/n)

Mr. Vivek -
- We didn't have visibility about impact of COVID
- In this time frame, we were unable to deal with uncertainty
- moratorium was given to so many borrowers/landers
- many borrowers used #ForceMajeure clause
- this created mismatch (18/n)

Mr. Vivek -
- Equity schemes will be on consistent track
- High credit fund will also be on good track
- team is very experienced
- We recognize pain of investors (19/n)
#mutualfund #FranklinMF #FranklinTempleton #FranklinConference

Final comments
- we shall deal with borrowings
- there will be monthly payments as when cash is realized
- we want to ignore stress selling of holdings
- we remain committed to business in India

CONCLUDES
(20/n)
#mutualfund #FranklinMF #FranklinTempleton #FranklinConference

Amid the hurricane of uncertainty invited by Franklin Templeton in debt mutual fund schemes, @abcabslmf has come up with a clarification stating that their funds are as solid as bunkers or army. Read here (21/n)

As these Franklin Templeton funds are now water under the bridge, its importance to understand how to analyse your present debt portfolio. There can be three primary parameters to judge a fund in present situation:
#mutualfunds #FranklinTempleton #mutualfundsahihai ? (22/n)

1. Time duration of fund - If your fund is holding long term securities such as 10 yr bonds/gilts, it may be risky due to uncertainty. Remember, solvency is not under risk but liquidity is the issue knocking the door.
#mutualfunds #FranklinTempleton (23/n)

2. Borrowings/negative holdings - if the fund has higher negative holding then its a sign of illiquidity and redemption pressure on fund. Higher than 3% then risky.(Look for this at the end if scheme holdings). Remember, one of these Franklin fund held 17% negative holding (24/n)

3. Quality of securities held by funds - If fund holds sovereign securities or large corporate securities then less risky but if sec of comp. held which will face cash crunch due to covid, then it may be risky fund. (You can easily recognise stressed comp) (25/n)

Success has many fathers. Failure has none.

Morningstar suspends ratings of 4 Franklin mutual funds with immediate effect. 😂 #mutualfunds in

Listen to Mr. Santosh Kamath to know the reason behind the failure. His BONUS. And he said it around 2 years back. Remember he received a bonus of around 17-18 crore with this risk of extra return. (26/n) #mutualfunds

https://twitter.com/AnishA_Moonka/status/1253751507368980482?s=19