SBI Funds Management Ltd on Tuesday, August 22, 2023, announced the completion of the liquidation of assets in the six shuttered debt schemes of Franklin Templeton Mutual Fund (FTMF) and distributed Rs 27,508 crore to the latter's unitholders. Franklin Templeton in April 2020 announced the shutting down of the six debt mutual fund schemes, citing redemption pressures and lack of liquidity in the bond market.
SBI Funds Management Ltd was then tasked by the Supreme Court in 2021 to undertake the exercise of disbursement and liquidation of assets of the six wound-up debt schemes of FTMF.
With this, SBI Funds Management has liquidated 217 securities and disbursed around Rs 27,508 crore which constitutes 109 per cent of the value of the securities as of date of winding up, April 23, 2020, the company said in a statement. The six schemes had collective assets under management of Rs 25,215 crore, when the decision to close the funds was announced. “We are happy to share that the last tranche of the securities, forming part of FTMF wound up debt schemes, has been liquidated as part of the above mandate given to us,” SBI Funds said.
The fund house further said that the liquidation activity was done without creating any market dislocation in order to get the best liquidation value and safeguard the interests of the unitholders of FTMF.
The schemes were Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund.
Franklin Templeton spokesperson said, "We are happy to note that the orderly liquidation has resulted in the unitholders of all the six schemes under winding up receiving over 100 per cent of the respective reported AUM values as of April 23, 2020. The total amount disbursed ranges between 107.2 per cent and 113.4 per cent of the respective reported AUM values. The latest tranche of payment for the unitholders of Franklin India Short Term Income Plan (FISTIP) will be processed and released shortly."
Closure Of A Mutual Fund Scheme
As mutual funds are regulated by Securities and Exchanges Board of India (Sebi), when a mutual fund company shuts down, either the trustees of the fund have to approach Sebi for approval to close or Sebi by itself can direct a fund to shut. Sebi mandates that all investors are returned their funds based on the last available net asset value, before winding up.
However, when a mutual fund is acquired by another fund house, two choices emerge: schemes persist with new management, or they merge with new schemes. In both cases, investors are given an option to exit the schemes with no load being levied.