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The Franklin Templeton Debt Mutual Funds Crisis

Research Article

Authors: H.Matharu and V.K.Manda

Journal Name: Vidyabharati International Interdisciplinary Research Journal (Special Issue); ISSN: 2319-4979

Volume Number: Special Issue of "VARTANA 2021" International Conference :IEIGSD on 28-29 July 2021

Publication Date: March 26, 2021

Pages: 251-261

Journal Paper Link on Publisher Website

Abstract: The COVID-19-triggered lockdown in India caused a crisis in the capital markets during March and April 2020. A global-wide panic crashed the equity and debt markets as investors feared company operations would be severely affected. The distress has hurt investors who proceeded to stop their ongoing investments and began to redeem funds. The sudden outflows from the mutual fund industry dried up liquidity in the Indian secondary bond market, creating panic in the credit risk segment. Left with no options, Franklin Templeton India (FTI) Mutual Fund had to wind up six of its debt funds, causing industry-wide panic. This event-based study focuses on the series of events that led to the inevitable decision taken by the fund house and the reaction from various stakeholders such as investors and the regulator. Historical Analysis form of the Qualitative Research process is used to analyze the series of events, make observations of the reactions of stakeholders, and draw some lessons out of it. Findings from this study can help us highlight the risks involved in the debt segment and thereby improve our understanding of the crisis management mechanisms of the mutual fund industry.

Keywords: mutual fund crisis, mutual fund regulations, mutual fund liquidity, liquidity crisis, credit risk funds

DOI: https://doi.org/10.17605/OSF.IO/GJWBE

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