Over 60% haircut in FTMF shut funds is ‘Black Swan’ event: CFMA

New Delhi, Jan 21 : Describing the over 60 per cent haircut in six shut debt funds of Franklin Templeton as a ‘Black Swan’ event for three crore unit-holders of the entire domestic mutual fund industry, the Chennai Financial Markets and Accountability (CFMA), an organisation fighting for the cause of investors, on Thursday said three lakh unit-holders of Franklin Templeton Mutual Fund (FTMF) are set to lose Rs 16,000 crore out of Rs 28,000 crore invested.
“The FTMF unit-holders are not only set to lose over 60 per cent of their investments, but this will set a bad precedent for other mutual funds to go for such shenanigans which can erode the assets under management of the mutual fund industry by Rs 15 lakh crore out of the total asset under management of Rs 30 lakh crore,” the CFMA said, adding that this ‘Black Swan’ event may culminate into an Indian subprime crisis, akin to the US subprime crisis of 2008, if it is not controlled.
It reiterated that the recovery would not fetch more than Rs 12,000 crore as against the total receivable of Rs 28,000 crore and that too over a period of five to seven years. “At that time, there will be no FTMF, its President Sanjay Sapre and MD and CIO, India Fixed Income, Santosh Kamath.” Notably, FTMF has said a majority of the unit-holders in its six frozen fixed-income schemes have voted in favour of an orderly winding-down. “Out of the total number of unit-holders who cast their votes, over 96 per cent of them have voted in favour of the winding up of the six schemes,” Sapre said in a communication to the investors.
The CFMA pointed out that FTMF has been claiming that it has realised more than Rs 13,000 crore in its six shut schemes, while its lawyers made statements before the Supreme Court that around Rs 9,000 crore are available for distribution without explaining how and where the remaining Rs 4,000 crore has vanished.
FTMF, which has front-ended the lie of COVID-19 as an excuse to abruptly shut down the six schemes, failed to explain how the pandemic reason has not been the case with its other schemes or any other mutual fund.