InvestorQ : What are the major challenges that you see even if the funds are distributed to the unit holders of Templeton debt funds?
Katherine Gonsalves made post

What are the major challenges that you see even if the funds are distributed to the unit holders of Templeton debt funds?

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rhea Babu answered.
2 weeks ago
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There are a number of risks but one immediate risk will be zeroing in on the actual haircut that the investors who put money in these six funds will have to take. To begin with, unit holders must reconcile is to the fact that there are going to be losses, and fairly large ones at that. Even after 9 months Templeton has not been successful in monetizing the balance assets. That only means that these funds are invested in toxic assets with no immediate exit possible.

The big question is, how much waiting period the other investments would have and how much of a haircut the investors will have to take. Templeton has smartly monetized the low-hanging fruit and left out the sticky ones, so the value of balance investments may be extremely low.

But the bigger challenge for SEBI is fixing responsibility. Can a fund be held accountable for risks taken by the fund manager in the normal course of business? Let us not miss the key point that the fund manager, in this case has been reckless with the unit holders’ money. The kind of risk that the fund manager assumed in certain short duration funds is outright ridiculous.

Also, SEBI must raise probing questions about the way the AMC handled the issue and summarily closed redemptions. Also, why did trustees not play the watchdog role that they were supposed to play. The case will surely raise uncomfortable questions. In the process, the MF investors will gain confidence and keep faith in the markets.

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