Franklin Templeton Case study

By Shivanjali Shukla, Student at Jindal Global Law School

Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.”

Introduction

Franklin Templeton is one of the leading mutual fund houses in the country and a premier organization for global investment management. On 24th April, the company announced that it would be winding up six debt schemes. The schemes which were announced to be wrapped up are: Franklin India low duration fund, dynamic accrual fund, credit risk fund, short term income plan, ultra-short bond fund and income opportunities fund. These schemes consisted of investor’s assets worth around INR 30000 crore. The schemes which were wound up by the company were credit risk funds. Credit risk funds are basically those kinds of funds which lend 65% or more to the low-credit quality debt securities. People who have low credit rating, try to compensate by agreeing to pay a higher rate of interest in comparison to those people who have a decent credit rating. However, since they have low credit ratings, the chances of defaulting are very high, thus this creates huge risk for the lenders.

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