As we can see from the adjacent image the maximum Franklin Mutual fund is invested in Vodafone heavily and it is going to take the hit most among all the mutual funds.
However, one should not run to get out as its NAV is lower at the present time and thus it is going to improve with the passage of time. Thus one should not panic and be invested in the mutual fund.
You can see which banks are going to be affected due to Vodafone exit here.
Implications Franklin Templeton Mutual Fund
The Franklin Templeton MF NAV - Vodafone episode... in simple words ... Let me explain you the Franklin Templeton thing in simple words:
Franklin Templeton mutual fund schemes experienced a sharp fall in NAV yesterday. As investors we invested in the debt mf schemes Franklin Templeton gave our money to Vodafone Idea as a debt (loan) Now Vodafone is in crisis and it seems it cannot repay the loan according to the terms it promised earlier So Franklin Templeton, back in November has created a separate portfolio called Side Pocketed portfolio and moved the toxic component of the portfolio to it. By side pocketing, there will be two portfolios - one good one and another toxic Because of this, investments and redemptions can happen in the healthy portfolio
The scheme will continue to chase Vodafone for the recovery of money of the topic portfolio Now with yesterdays Supreme court ruling etc, it appears it is even more difficult to recover the money So the scheme has marked down the exposure Marked down to zero means, on the account books it is shown as zero value but it does have some value And the scheme continues to attempt the recovery
We do not have any timeline as to when the recovery happens, if at all if it happens. So, as existing investors of the scheme, we already lost that part And when recovery happens, the nav will go up and we will get the benefit again The worst case scenario is write off Simply Better to exit from any of Frankline Fund ??? It means that there is no possibility of recovery at all and that the fund houses are sort of giving up The NAV is already reflecting the mark down, What use exiting now? So, I feel the investors have nothing to do in the present circumstances. But the recovery attempt will continue ...right ji ? Yes. The AMC will continue to recover ... or perhaps sell the debt to another company - say Airtel or an ARC. If at all Any amount recovered debt will be paid back ...atleast a few portion ... Absolutely. It is investors money and AMC will not "eat" the money. All eligible investors will get it even if they exit the scheme now. _When crisis happens, investor panic leads to over reaction and makes the small panic a really big one._ Now, let us think of extreme cases. Vodafone goes bankrupt... goes to IBC or something like that Something like what happened to DHFL. In such a case, FT will represent its investors and also claim for the recovery of the money. The blessing in disguise is that the rating of Vodafone paper is not yet default grade. Even if it a default, the above consequences happen. This is like pro-active clean up. This is what the MF said: _Debt securities of VIL held in the schemes of FTMF have been marked down to zero. The valuation adjustment only reflects the realizable price of the relevant securities on the date of valuation and does not indicate any reduction or write-off of the amount repayable by VIL. The schemes will continuously monitor the developments in VIL and take appropriate steps to recover the investment proceeds in the best interest of its unitholders._ I think since it is invested via debt...repaying priority is high from the company's end ...is it so ji ? Debt is an obligation. Hence debt holders have priority over Equity investors.
However, one should not run to get out as its NAV is lower at the present time and thus it is going to improve with the passage of time. Thus one should not panic and be invested in the mutual fund.
You can see which banks are going to be affected due to Vodafone exit here.
The Franklin Templeton MF NAV - Vodafone episode... in simple words ... Let me explain you the Franklin Templeton thing in simple words:
Franklin Templeton mutual fund schemes experienced a sharp fall in NAV yesterday. As investors we invested in the debt mf schemes Franklin Templeton gave our money to Vodafone Idea as a debt (loan) Now Vodafone is in crisis and it seems it cannot repay the loan according to the terms it promised earlier So Franklin Templeton, back in November has created a separate portfolio called Side Pocketed portfolio and moved the toxic component of the portfolio to it. By side pocketing, there will be two portfolios - one good one and another toxic Because of this, investments and redemptions can happen in the healthy portfolio
The scheme will continue to chase Vodafone for the recovery of money of the topic portfolio Now with yesterdays Supreme court ruling etc, it appears it is even more difficult to recover the money So the scheme has marked down the exposure Marked down to zero means, on the account books it is shown as zero value but it does have some value And the scheme continues to attempt the recovery
We do not have any timeline as to when the recovery happens, if at all if it happens. So, as existing investors of the scheme, we already lost that part And when recovery happens, the nav will go up and we will get the benefit again The worst case scenario is write off Simply Better to exit from any of Frankline Fund ??? It means that there is no possibility of recovery at all and that the fund houses are sort of giving up The NAV is already reflecting the mark down, What use exiting now? So, I feel the investors have nothing to do in the present circumstances. But the recovery attempt will continue ...right ji ? Yes. The AMC will continue to recover ... or perhaps sell the debt to another company - say Airtel or an ARC. If at all Any amount recovered debt will be paid back ...atleast a few portion ... Absolutely. It is investors money and AMC will not "eat" the money. All eligible investors will get it even if they exit the scheme now. _When crisis happens, investor panic leads to over reaction and makes the small panic a really big one._ Now, let us think of extreme cases. Vodafone goes bankrupt... goes to IBC or something like that Something like what happened to DHFL. In such a case, FT will represent its investors and also claim for the recovery of the money. The blessing in disguise is that the rating of Vodafone paper is not yet default grade. Even if it a default, the above consequences happen. This is like pro-active clean up. This is what the MF said: _Debt securities of VIL held in the schemes of FTMF have been marked down to zero. The valuation adjustment only reflects the realizable price of the relevant securities on the date of valuation and does not indicate any reduction or write-off of the amount repayable by VIL. The schemes will continuously monitor the developments in VIL and take appropriate steps to recover the investment proceeds in the best interest of its unitholders._ I think since it is invested via debt...repaying priority is high from the company's end ...is it so ji ? Debt is an obligation. Hence debt holders have priority over Equity investors.
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