Franklin Templeton’s India boss defends decisions, says employees still hold investments in shut funds

Franklin Templeton Asset Management’s President Sanjay Sapre has defended the fund house and the decisions taken by them ahead of the shutting of the six of its debt mutual fund schemes. Sapre, in a letter to investors, said that reports surfacing in various circles that suggest wrong doing or insider trading at the fund house were misleading, news agency PTI reported. Earlier this week, news reports claimed that the forensic audit of the six shut mutual funds by SEBI, showed that some employees of Franklin Templeton had redeemed their positions in the six schemes just ahead of winding up.

“Winding up of the six funds has had a significant impact on the trust you placed in us as investors and partners. However, I remain certain that this decision, no matter how difficult, was the right decision for our investors to prevent value erosion,” Sanjay Sapre said in the letter to investors. While ridiculing the reports, Sapre said that employees of Franklin Templeton who invested in the six schemes continue to hold significant investment in the now closed schemes. “”Claims have been made that some officials redeemed investments before winding up suggesting wrong doing or insider trading, and that Franklin Templeton did not exercise put options in papers despite ratings downgrade suggesting there were some reasons beyond the exercise of normal business judgement for such an action,” he said.

Sapre, who is the President of Franklin Templeton India since 2016, further claimed that auditors have themselves acknowledged in their submission to the market regulator that the report is subject to modification basis explanations and responses to be provided by Franklin Templeton. He termed the reports regarding the forensic audit as misleading. 

The fund house, which has two decades of experience in India, shut six of its debt mutual fund schemes on April 23. Franklin Templeton said that the winding up of the schemes was forced by the redemption pressures and lack of liquidity in the bond market. Earlier last week the fund house said that since April 24, the six now shut debt fund schemes have received Rs 8,262 crore from maturities, pre-payments and coupon payments. Of these six schemes, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund, Franklin India Low Duration Fund and Franklin India Credit Risk Fund have 40%, 19%, 19%, and 4% of their respective assets under management (AUM) available in cash to distribute to unitholders, Franklin Templeton had said.