Franklin Templeton lost 28664 Crores debt fund AUM in 2020!

Image of empty chairs to signify the flight of aum as Franklin Templeton Loses 28664 Crores debt fund AUM in 2020

Published: May 15, 2020 at 11:00 am

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While corporate investors withdrew from several Franklin debt funds forcing the closure of six funds (a first in India), the AMC lost 28,664 Crores of debt fund AUM from 31st Dec 2019 to April 30th 2020. Amusingly, one of their debt funds grew 520% in AUM! A look at the change in their debt AUM.

Franklin India Feeder – Franklin U.S. Opportunities Fund increased 32% over this period from  1148 Crores (Dec 31st 2019) to 1515 Crores (April 30th 2020). Interest in this fund seems to have increased after the fall in the US markets.

Franklin India G-Sec Fund saw a 32% growth from 226 Crores to 298 Crores probably in anticipation of rate cuts. The AUM of Franklin India Banking & PSU Debt Fund moved up 10% – 1021 to 1126 Crores. Franklin India Corp Debt Fund fell from 1404 Crores to 1072 Crores, a 24% drop.

Franklin India Floating Rate Fund registered a 38% drop in AUM from 402 to 250 Crores. This is not one of the six closed funds. It was able to manage due to the credit quality and short-term nature of the portfolio.

The same reasoning will also apply to Franklin India Savings Fund – part of my Handpicked List of Mutual Funds April 2020. This registered the second-biggest drop in AUM for Frankin. It fell from 4724 Crores to 1895 Crores – a 60% drop.

The fact that it is still open for business either suggests that the quality, short-term non-gilt segment of our bond market has become more liquid or the urgency for cash is not as much as it was during the 2008 financial crisis. See: How the 2020 debt fund crisis is a repeat of 2008: Can this be avoided?

The largest drop was seen for Franklin India Liquid Fund-Super Inst:  From 12529 Crores to 3582 Crores, a 71% drop.

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Franklin India Overnight Fund AUM increased from a paltry 173 Crores to 1071 Crores, a 520% increase, signifying how cash became king in 2020.

The closed six funds registered huge losses (the reason for the closure). The numbers are in crores and represent the change in AUM from Dec 31st 2019 to April 30th 2020.

Franklin India Dynamic Accrual Fund:  3851 to  2437 (-37%)
Franklin India Ultra Short Bond Fund-Super Inst 16894 to  9591 (-43%)
Franklin India Credit Risk Fund 5899 to  3307 (-44%)
Franklin India Income Opportunities Fund 3100 to 1638 (-47%)
Franklin India Low Duration Fund 4627 to  2342 (-49%)
Franklin India ST Income Plan 10964 to 5316 (-52%)

The combined AUM loss from these is 20,705 Crores.  Another 2830 Crores lost from Franklin Savings, 5649 Crores from Franklin Liquid Fund. The overall loss is 28,664 Crores for all debt funds.

Assuming a 1% expense fee, this is a potential income loss of about 250-300 Crores.  According to the AMC financials as on Sep 2019, the total income fell from 921 Crores in Sep 2018  to 874 Crores in Sep 2019. The AMC will have to brace itself for a big fall in Sep 2020. Will institutional investors return? Will the AMC survive? Some tough days ahead for them.

 

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8 Comments

  1. Sir,

    What happens to Equity, Hybrid fund investors if the AMC faces tough days? Is there reason to panic? Should we pull the money out?

  2. Once May’20 data comes up, I won’t be surprised if their debt AUM size falls down to less than 5000 Crores.

  3. Franklin India Feeder – Franklin U.S. Opportunities Fund is an equity fund of Fund. You cant compare apples with oranges.

  4. Indian Debt MFs are laden with invisible land mines. Corporations are mostly crooks who are above law and will go to any extent to loot public money. FIIs are slightly cultured version with same intention.

    On the other hand luckily Indian Debt market is largely owned by Indians and FIIs are restricted to around 5%. Indonesia is 30%. I have seen there how FIIs left them naked in 1997. IDR plunged from 3000 to 10,000 in few months. I was paid in USD. But the situation was similar to present lockdown and dangerous among starving population.

    Franklin is the king of subprime. 3 or 4 yrs back they wrote off a big chunk in auto space. I sent a email to then CEO of FT Asia Dr. Mark Möbius complaining about undue risk being taken by Indian Debt fund Managers of FT. No reply. They were riding high with 5* valuations by VR and others. Kamath and Sapre were subprime kings.

    Debt funds are not for retail. Only people with 10 Lakhs and above net taxable income should consider. But more caution is necessary than even equity funds because of opaqueness.

  5. Any idea if there is an impact on how their equity funds ? They have ben having a slump for a while now

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