Debt, Hybrid Funds Advisors Blamed Franklin Fiasco for Large Outflows in April 2020

The Franklin Templeton mutual fund fiasco seems to hit mutual funds very badly. Most debt mutual fund categories witnessed very huge outflows in the last month i.e., April 2020.

The category hit very badly out of all is credit risk funds, which saw an outflow of Rs 19238.92 crore in April- data sourced by AMFI (Association of Mutal funds in India).

Franklin Templeton Mutual Fund shut down its 6 debt mutual funds quoting the illiquid scenario in the debt market due to COVID 19 epidemic on APRIL 23, 2020. It also stated that they are closing these schemes to protect the money of investors.

Impact of the Statement by Franklin Templeton Mutual Fund

This sudden statement by Franklin Fiasco to stop buying and selling, STP, SWP, and so on from debt schemes resulted in creating a panic environment for conservative investors as they asked their investors to sell their investment in debt mutual funds. The industry is under the threat that this would hurt the entire debt mutual fund space along with Franklin Templeton Mutual Fund.

This also resulted in increasing the net inflows for the same safer mutual fund categories like overnight funds, low duration funds, liquid funds, and banking & PSU funds from Rs 190 crore to Rs 19000 crores.
Hybrid Mutual Fund that invests in both equity, as well as debt categories, had also faced massive outflows in April. Hybrid Affected Hybrid Funds categories except arbitrage funds are Conservation hybrid funds, dynamic asset allocation funds, aggressive hybrid funds, multi-asset allocation funds, and equity saving funds.

Franklin Templeton Mutual Fund Blamed for Large Outflows in April

It also had been saying that Franklin Fiasco planted fear in the mind of investors as in that time of crisis all investors were trying to safeguard their money. All this nervousness resulted in this April hit.

Mutual funds advisors believe that the outflow is based on the last 3 months’ performance of hybrid and debt schemes. Most of the schemes that resulted in inflows have shown positive returns in the last 3 months whereas some schemes have also faced huge outflows which have negative returns.

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