Franklin Templeton Asset Management India is set to re-enter India’s debt market with a new fund offering, marking its return after the unexpected closure of six funds in April 2020.
The launch of the Franklin India Ultra Short Duration Fund comes more than four years after the asset manager halted $3.7 billion in debt schemes due to a severe liquidity crisis exacerbated by the shadow banking sector’s troubles and the COVID-19 pandemic.
The new fund, managed by Rahul Goswami, Chief Investment Officer and Managing Director for India fixed income at Franklin Templeton, and portfolio manager Pallab Roy, will open for subscription on August 19 and close on August 28.
It will focus on investments in corporate bonds, certificates of deposit, commercial papers, treasury bills, and government securities, with a weighted average maturity of three to six months.
Franklin’s return to the debt market comes amid improving conditions in India’s credit markets, as banks’ bad loan ratios have reached multi-year lows. The fund aims to offer a balance of income and capital growth, particularly for conservative fixed-income investors.
“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,” Goswami in a release.
This new product reintroduces a category that was part of the funds shuttered in 2020. Currently, Franklin Templeton’s debt portfolio in India includes six schemes, such as liquid, money market, overnight, floating rate, banking & PSU, and corporate debt funds.
The Ultra Short Duration Fund is designed to meet short-term liquidity needs or act as a reserve for emergency funds.
The 2020 closure of six debt schemes, which held over Rs 25,000 crore in assets, was a significant event in India’s financial landscape. It was a direct response to the tightening liquidity conditions and the broader impact of the shadow banking crisis. Since then, Franklin Templeton has fully reimbursed investors.