6 FOFs from Franklin Templeton see NAVs dip as debt funds are wound up

MUMBAI: The NAV of as many six fund of fund (FoFs) from Franklin Templeton India mutual fund fell by as much as 22.42% in a single day due to the winding up of six debt schemes at the fund house. A fund of funds (FOF) is an investment strategy of holding a portfolio of other schemes rather than investing directly in stocks, bonds or other securities.

The NAV of Franklin India Dynamic Asset Allocation FOFs (fell 16.6%), Franklin India Multi-Asset Solution (fell 22.42%), Franklin India Life Stage FOFs-20 (fell 6.59%), Franklin India Life Stage FOFs-30 (13.51%), Franklin India Life Stage FOFs-40 ( fell 17.81%) and Franklin India Life Stage FOFs-50 Plus (fell 0.52%).

“Pursuant to the decision to wind up Franklin India Short Term Income Plan (FISTIP) and Franklin India Dynamic Accrual Fund (FIDA), announced on April 23, 2020, the investments by the Fund of Fund Schemes in the above mentioned underlying schemes that are wound up were illiquid effective April 24, 2020. Hence, considering the immediate illiquidity of the investment, these funds were fair valued,” said a spokesperson for Franklin Templeton Mutual Fund. He further added that the fund house is re-working the underlying asset allocation of the fund of fund schemes and will intimate the changes to investors shortly.

Asset allocation funds have a mix of equity and debt, where equity proportion rises on lower valuations. As of March end, the fund had a 50:50 allocation to both equity and debt in the Dynamic Asset Allocation Fund.

“Investors in the scheme should stay invested, as the bad news is built in and it does not make sense to exit at a loss now. When the debt securities in the schemes are are liquidated, as a unitholder you will get back your money,” says Amol Joshi, Founder, Plan Rupee, a Mumbai based distributor.