Franklin Mutual Fund: Safe Investment Option?

Franklin Templeton is one of the best-known investment firms, offering investors a wide range of investment opportunities, including hundreds of mutual funds, to help manage their wealth. The company has been established for over 70 years and is a large asset management company, using Benjamin Franklin's likeness as its corporate logo. Franklin Templeton offers actively-managed mutual funds and a wide variety of strategies across several asset classes. However, there are some concerns about the safety of investing in Franklin Templeton mutual funds, particularly in light of the recent crisis and the decision to wind up six debt schemes.

Franklin Templeton's equity funds performance

Franklin Templeton's equity funds have shown strong performance over the years. The company has a wide range of equity funds catering to different investor needs. Here is a detailed look at some of Franklin Templeton's top-performing equity funds:

Templeton India Value Fund Direct Plan Growth:

This fund falls under the Equity category of Franklin Templeton Mutual Funds. It has delivered impressive annualized returns of 22.16% and 27.44% over the past 3 and 5 years, respectively. The minimum investment amount for this fund is ₹5,000 for a lump sum and ₹500 for SIP.

Franklin India Flexi Cap Fund Direct Growth:

The Franklin India Flexi Cap Fund is another top-performing equity fund from Franklin Templeton. With annualized returns of 18.84% and 24.59% over the last 3 and 5 years, it offers investors exposure to a diverse range of large, mid, and small-cap stocks. The minimum investment amount is the same as the Templeton India Value Fund.

Franklin India Focused Equity Fund Direct Growth:

This equity fund has generated annualized returns of 18.16% and 23.2% over the past 3 and 5 years, respectively. The fund focuses on investing in a concentrated portfolio of equity stocks across market capitalisations. The minimum investment amount is ₹5,000 for a lump sum and ₹500 for SIP.

Franklin India Smaller Companies Direct Fund Growth:

This equity fund from Franklin Templeton has delivered exceptional returns, with annualised returns of 25.77% and 31.56% over the past 3 and 5 years. The fund invests primarily in small-cap companies, offering investors exposure to high-growth potential. The minimum investment amount is ₹5,000 for a lump sum and ₹500 for SIP.

Franklin India Bluechip Direct Fund Growth:

The Franklin India Bluechip Direct Fund invests in a portfolio of large-cap equity stocks, aiming for long-term capital appreciation. The fund has provided annualised returns of 12.43% and 18.75% over the last 3 and 5 years, respectively. The minimum investment amount is ₹5,000 for a lump sum and ₹500 for SIP.

Franklin Mutual European Fund Class A (TEMIX):

This fund seeks capital appreciation by investing primarily in the securities of European companies. As of January 31, 2022, it had assets under management (AUM) of $842.47 million. The 5-year average annual net asset value (NAV) return was 6.09%, and it charges a net expense ratio of 1.33%.

In summary, Franklin Templeton offers a diverse range of equity funds catering to different investor needs and risk appetites. The strong performance of these funds demonstrates Franklin Templeton's expertise in equity fund management, making them a reliable choice for investors.

AUM slide and loss of confidence

In April 2021, Prime Investor, a Chennai-based independent research firm, advised investors to exit all schemes managed by Franklin Templeton Mutual Fund. One of the reasons cited for this decision was a slide in assets under management (AUM).

Franklin Templeton's decision to shut down six debt schemes in April 2020, resulting in Rs26,000 crore of investor money being locked up, had put the fund house under pressure from investors and distributors. While investors in five of the six shuttered debt schemes recently received Rs 9,122 crore after a gap of 10 months, the incident had damaged the fund house's popularity.

As of 31 March 2024, Templeton Asset Management India Pvt. Ltd., which began operations in India in 1996, offers around 197 schemes with an AUM of Rs. 87,897 Crores.

Franklin Templeton Investments, established more than 70 years ago, is a large asset management company that uses Benjamin Franklin's likeness as its corporate logo. The company has over $724.1 billion in assets under management worldwide and offers a wide range of investment opportunities, including hundreds of mutual funds, exchange-traded funds (ETFs), private funds, and separately managed accounts.

Botched handling of events

What ailed the six debt schemes of Franklin India was that they took on high credit risks to deliver high returns, assuming favourable market conditions would persist. However, when bond market liquidity tightened and redemptions loomed, the fund house was caught between a rock and a hard place. Instead of being transparent with investors about the challenges it faced, Franklin India found itself in a 'fund lock down', preventing investors from withdrawing their money. This broke the fundamental promise of an open-ended mutual fund, which is that investors can pull out their money at any time.

Franklin India's actions denied investors the opportunity to exit at a transparent price, despite their debt schemes being favoured by small investors, retirees, and those investing emergency money. The fund house also failed to adequately explain its actions to investors, instead taking a moral high ground stance that it had preserved value for investors and had no other choice.

The non-disclosure of forensic audit findings and allegations about the AMC's top personnel/relatives redeeming their units before the scheme closures further confused investors about the quality of governance at the fund house. Recent reports of the group exerting diplomatic pressure for a 'fair trial' have done nothing to shore up lost confidence.

Franklin Mutual European Fund Class A

Franklin Templeton is one of the best-known investment firms, offering investors a wide range of investment opportunities, including hundreds of mutual funds, to help manage their wealth. Established over 70 years ago, Franklin Templeton is a large asset management company, known for its actively-managed mutual funds, and it offers a wide variety of strategies across several asset classes.

The Franklin Mutual European Fund Class A (TEMIX) seeks capital appreciation, with income as a secondary goal. It does this by investing at least 80% of its net assets in the securities of European companies, focusing primarily on undervalued equity securities and, to a lesser extent, distressed securities and merger arbitrage opportunities.

As of 31 January 2022, the fund had exposure to German and UK stocks with slightly more than a 22% allocation each, while 19.09% was allocated to France and 11.41% to the Netherlands. The top five sectors with the highest portfolio weighting within the TEMIX were: Capital goods (13.92%), Food, beverage, and tobacco (9.37%), and Consumer Durables and Apparel (7.45%).

The fund's assets under management (AUM) were $842.47 million as of 31 January 2022, with a 5-year average annual net asset value (NAV) return of 6.09% as of the same date. The net expense ratio was 1.33% as of 1 May 2021.

It's important to note that the fund purchases equity securities in foreign currencies, such as the euro and British pound sterling. This means the fund's returns are highly exposed to currency risk and may fluctuate due to changes in exchange rates.

The TEMIX fund charges load fees of 5.5% for investment balances of less than $50,000 and has a minimum investment requirement of $1,000.

Franklin Templeton's experience

Franklin Templeton is one of the best-known investment firms, offering investors a wide range of investment opportunities, including hundreds of mutual funds, to help manage their wealth. Established more than 70 years ago, Franklin Templeton Investments is a large asset management company, which uses Benjamin Franklin's likeness as its corporate logo.

Franklin Templeton mutual funds boast highly experienced management teams, disciplined investment approaches, and high marks from funds rating agencies. Known for its actively-managed mutual funds, Franklin Templeton offers a wide variety of strategies across several asset classes.

The firm's largest stable of products falls under the Franklin banner, which runs a large number of fixed-income and municipal bond strategies, along with some equity and alternative funds. The Templeton funds specialize in international equity and fixed income, while the Franklin Mutual series has a value tilt. Some of the firm's funds are sub-advised, while others are managed in-house. The Franklin Templeton funds are staples of many 401(k) and other retirement plans.

The Templeton Funds, which merged with Franklin in 1992, were among the pioneers of emerging-market investment strategies. Franklin Templeton also runs several closed-end funds and one exchange-traded fund.

However, Franklin Templeton's equity funds have not been performing well for a few years. Most of these funds have low Prime Ratings and have slipped over the course of the past year. Most were rated 'Sell' or 'Reduce' in MF Review Tools or, at best, a 'Hold'. Some of them lost out on being too value-conscious and missing out on substantial rallies in a narrow universe of stocks. A few others lost out on top concentrated calls not working for a good while.

In addition, Franklin Templeton undermined investor confidence by abruptly winding up six of its debt schemes, which were very popular with retail investors. This caused sharp withdrawals by investors that reduced their assets under management (AUMs).

Frequently asked questions