I have been asked many questions about Franklin Templeton – let me answer each question…
a. I have invested in the 6 debt funds of FT, will I get back at least my Principal?
Answer is yes. I had said this in April 2020 also – there is a liquidity crisis, not a solvency crisis. So yes, you will get your money, mostly in full. No, the fund house is not doing you a favor, you will suffer a liquidity problem, not an insolvency problem. In about 2 years time you will receive all the money is what I had said. I did not expect some over enthusiastic people to go to court and delay the whole process by 8/9 months. That was unfortunate, but during that period the money was earning decent coupon, and hence the money was not idle. The current update is that all the borrowings have been repaid, all the funds are in the money, and the redemption will happen sooner than the schedule given to us.
b. How much of my Principal will I lose?
See answer to question a. It is always difficult to say whether all the money will be recovered, but I do think that most of the money will be recovered. Saying there will be no capital loss in any fund seems to be difficult to say. Hold your horses, we will know soon. At worst by August or September you will know this.
c. Will FT continue its business operation in India or will it leave India like many Foreign fund managers?
This is a very difficult question to answer. I also heard rumors that Hdfc Mutual fund was going to take over the assets of FT. I know FT for the past 21 years AT LEAST, if not more. They recruited the best people, spent on training, and created very good resources in the industry. Many of its employees moved to top positions in the FT worldwide employment team.
Hdfc Mutual fund has its listed equity – and using this to acquire assets makes a lot of sense. Will FT be interested in an all stock deal? and at this valuation of Hdfc amc shares? I doubt whether FT will fall for this bait. However, I personally will not build a business for 26 years and give it away for a small amount. In the non digital world it must have taken a lot of travel, and I know many of the people whose blood and sweat was spent on creating this network of sales people.
My interaction with advisors shows a mixed response. Some MFD still swear by the relationship, and some have withdrawn their assets. However FT has not shrunk much in Aum – and it will take a lot of effort to justify a big team that they have in India.
In June 2020 FT acquired Legg Mason and will surely need access to big markets like China and India. It is also wrong to judge all fund houses by the actions that were taken decades back would be wrong. I may not be right, but FT may not sell its business from a position of weakness. They have a good competent team in equity, and debt. Of course, they have a sales team, MFD network, bank relationships – why would they just give up everything and walk out? I do not think they will go, but I could be wrong, I am just guessing.
to be continued…..
d. Is there a corruption angle to this whole debt episode?
e. Have you withdrawn your money from FT?
f. Should I withdraw all my money from FT? what is your suggestion?
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