Franklin Templeton's six wound-up schemes face concentration risks

Closed schemes had large exposure to some bond issuers

The six wound-up debt schemes of Franklin Templeton Mutual Fund (MF) have concentrated exposure to certain companies in the non-banking financial, asset reconstruction, and renewable energy sectors. This closely ties up fortunes of investors with how these companies weather challenges presented by the Covid-19 pandemic and the lockdown.

At the individual scheme level, three of the wound-up schemes have 9-10 per cent exposure to Shriram Transport Finance (STFC), which saw its long-term issuer rating downgraded by Fitch Ratings recently to factor in the asset-quality risks the company faces. The commercial vehicle portfolio is more exposed to business activity, which will be