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Prime Investor asks investors to exit all Franklin funds

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Prime Investor asks investors to exit all Franklin funds

Prime Investor, Chennai-based independent research firm, has asked investors to exit from all schemes managed by Franklin Templeton Mutual Fund.

“Underperformance of the equity mutual fund schemes, slide in assets under management (AUM), loss of confidence, and botched handling of events, likely flight of talent and change of sponsor are some reasons that have led to this decision,” said Prime’s co-founder Vidya Bala.

Franklin Templeton has been under pressure from investors and distributors after the fund house shut down six debt schemes in April 2020 that resulted in Rs26,000 crore of investor money getting locked up. While investors in five of the six shuttered debt schemes of

recently received Rs 9,122 crore after a gap of 10 months, the incident has dented the fund house’s popularity.

“At this juncture, this call is not on current performance but on possible sub-optimal performance going forward due to redemptions. Hence, with the few debt funds that are a hold, AUM declines and portfolio potential are reasons for our exit call now,” Prime said in a note.

On the decision to wind up the six debt schemes that led to investor money getting locked up, Prime said “Being able to pull out your money at any time is the fundamental promise that an open-end mutual fund gives its investors, and we feel that violating this promise is the worst thing a fund can do,” said the note.

Despite a rebound in performances of schemes like Franklin India Bluechip and Franklin India Focused Equity in the past one year, the investment advisor is worried about a flight of talent. Prime Investor does not rule out a change in Franklin’s sponsor.

“Franklin’s equity funds have steadily lost to peers for multiple reasons. Some of them lost out on being too value-conscious and missing out on substantial rallies in a narrow universe of stocks while few others lost out on top concentrated calls not working for a good while,” the note said.

In response to an email query on the matter, a Franklin spokesperson reiterated its commitment to the Indian mutual fund industry.

“We manage these schemes in line with their investment mandate with a view to delivering superior outcomes for our investors. Our equity team has a long track record of performance, commitment and independence. More than two thirds of our equity funds have a history of over 10 years including 4 funds which have completed 25 years,” the spokesperson said.

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