Franklin Templeton Mutual Fund announces first debt fund since 2020 crisis

The ultra-short duration fund was one of the funds among the six offerings that were shuttered in 2020

Franklin Templeton (India) Mutual Fund is launching its first debt fund since the asset manager’s sudden decision to shut down six debt funds in 2020, a move that led to a crisis of confidence among its investors.

The new product -- Franklin India Ultra Short Duration Fund -- will be co-managed by Rahul Goswami, chief investment officer-fixed income, who joined the fund house last year with the mandate to reinvigorate its debt vertical.

Scheduled to launch on Monday, the fund will invest in debt and money market instruments such as non-convertible debentures, bonds, certificates of deposit, commercial papers, treasury bills, and government securities. The portfolio will maintain a Macaulay duration ranging from three to six months, according to a statement by Franklin Templeton (India) Mutual Fund.

 

The new fund offer will close on August 28.

This ultra-short duration fund reintroduces one of the products shuttered in 2020. At present, Franklin Templeton (India) Mutual Fund’s debt portfolio includes just six schemes: Liquid, money market, overnight, floating rate, banking & PSU, and corporate debt funds.

“(The fund) could be a valuable addition for investors looking to manage their short-term liquidity needs or emergency funds,” said Goswami. “In the current macroeconomic scenario, and the expectation of the yield curve steepening on the back of a high liquidity environment, the fund aims to be well-positioned to deliver a combination of income and capital growth for conservative fixed income investors.”

In 2020, the abrupt closure of six debt schemes, totalling over Rs 25,000 crore in assets, was in response to a shadow banking crisis and tight liquidity conditions following the Covid outbreak. Investors have since been reimbursed in full.