Franklin Templeton mutual fund house in an email to its investors has provided the schedule of maturity dates of the investments of its 6 frozen debt schemes. The schedule released by the fund tells investors in its recently closed 6 debt schemes how long it will take to get 100 per cent of their invested money back. Surprisingly, Franklin Ultra Short term Bond Fund scheme in contradiction of its name will take 5 years to return 100 per cent of it’s investors’ money, as per the details shared by mutual fund house. Even Franklin India Low duration fund will take 5 years to return full money back to the investors.
It is to be noted that the time indicated by the schedule for return of full money of unit holders is much more than the Macaulay Duration of the fund type for most of the 6 frozen schemes.
According to Sebi guidelines, ultra short duration funds are required to invest in debt and money market instruments such that the Macaulay duration of the portfolio is between 3-6 months. Macaulay Duration is a measure of how long it takes for the price of bond to be repaid by the cash flows from it. In simpler terms, it is the time taken by the investor to get back all his invested money in the bond by way of periodic interest as well as principal repayments.
Following is the maturity schedule of the investments of the schemes which tells investors by when they can expect to get their money back.
Source: Franklin Templeton email to investors
FIUBF: Franklin India Ultra Short Bond Fund (No. of Segregated Portfolios – 1)
FILDF: Franklin India Low Duration Fund (No. of Segregated Portfolios – 2)
FISTIP: Franklin India Short Term Income Plan (No. of Segregated Portfolios – 3)
FIIOF: Franklin India Income Opportunities Fund (No. of Segregated Portfolios – 2)
FICRF: Franklin India Credit Risk Fund (No. of Segregated Portfolios – 3)
FIDA: Franklin India Dynamic Accrual Fund (No. of Segregated Portfolios – 3)
Similarly, those mutual fund investors who have invested in Franklin India Short-Term Income Plan, the 100 per cent return of money will take more than five years. Other schemes i.e. Franklin India Income opportunities Fund, Franklin India Credit risk fund and Franklin India Dynamic Accrual fund will take more than five years to return full money back to the investors.
The estimated timeline to return 100 per cent money of the investors has been prepared considering call options and put options dates, as per the document shared by the mutual fund house with its investors.
As per the table above, the investors of ultra short bond fund are likely to get 53% of their money back by May 15, 2021. However, only 4 per cent of the money is likely to be returned to the investors of short-term income plan during the same period.
As per Sebi guidelines, low duration funds are required to invest in debt and money market instruments such that the Macaulay duration of the portfolio is between 6 months – 12 months. Short duration fund are required to investment in debt and money market instruments such that the Macaulay duration of the portfolio is between 1 year to 3 years. Franklin India Income Opportunities Fund is a medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 years to 4 years.
Franklin India Credit Risk Fund debt scheme primarily investing in AA and below rated corporate bonds. As per Sebi guidelines: ‘credit risk funds are required to invest minimum 65% of the total assets in corporate bonds (investment in below highest rated instruments)’.
Franklin India Dynamic Accrual Fund is a dynamic debt scheme investing across durations. It comes under the dynamic bond fund category as per Sebi guidelines.
The mutual fund house has also shared the complete details of the portfolio of the six closed schemes along with the maturity date of the bond papers held in those schemes with the investors.