Thread by @gvkreddi

#FranklinTempleton Concall highlights:
- Committed to India investments
- Providing daily liquidity is the challenge
- Will forego management fees
- orderly winding down is in best interest of the investor
- companies invoking force majeure
- Will return as soon as possible

(Inputs courtesy of @sathish_sesh)
- Trying to focus on other portfolio, to avoid panic redemption from other schemes
People from Templeton on call:
Vivek, Sanjay, Anand Radhakrishnan, CIO & Head of equity.

I think it is a serious liquidity issue but AMC will remain operational.

Kamath says:
- It all started with Covid, which necessitated to lock the economy
- Been in the market for 25 years
- We don't know how this will pan out in the short to medium term
- Risk appetite will come back only when there is clarity on the market

#investing #investment

Central banks are lowering rates to bring this risk appetite back through artificial means
Someone has to play this game not for commercial reasons - from the central banks and governments
RBI has done a lot inclue LTRO
But, there is a flight to safety

Will find a solution going ahead
Unfortunately, investors keep coming and going out
When redemption, ways to generate liquidity
1. Look for cash flows from the assets
2. Borrow money
3. Sell the underlying paper - but non AAA has no takers or distress sale
We are doing all 3.

However, we are going through undue distress
We want to use the proceeds, the cashflow & sale in a equitable manner.
We are not able to see what is going to happen ahead.
This was the best thing to do in the interest of the investors.

What does mean for the portfolio to wind up?

If it was like a closed ended fund - on maturity, we will get the cash.
We don't want to hurry up to pay up, but, we don't want to take too long.
Balance - don't want to make a distress sale and destroy value.
#investing #investment

Some numbers..
In the last 6 mths, we generated cash of 25000 cr across these 6 funds - maturities, prepayments & sale. It was not disruptive sale.
We keep trying for prepayments, fair price sales. UST will see it come faster due to faster maturity.

Intentional is to pay as early, at a fair price.
Till that happens, funds will normally. NAV will keep coming up, cash will keep accruing.
We started this business after 2008/9, we performed well till a few months ago.
We also have a high credit portfolio - AAAs.

Separate team of 3 managers. They are doing a good job.
What we did for 6 funds should not have any impact on high credit side.

Call recording and transcript will be published shortly.

This market has a significant cost of liquidity.
Do u preserve value at the cost of liquidity or provide liquidity at the cost of value?
We need to protect investors who are still remaining invested.
Borrowing & distress sale is not the right thing.

- Liquidity is not an option for investors right now.
- This is the trade-off.
- Accept the imperfection in the wind-down process.

How to deal with asymmetry?
Lenders asked to provide moratorium but, we have to meet our mkt obligations
Difficult times & difficult decisions
We will be criticized by upset people
Final outcome best for investor
Deeply committed. Equity team has stellar track record.

End! 🙏