Franklin Templeton Mutual Fund has fallen well short of most investors' expectations, but it would be premature to write it off now.
All through the bull run they cast their lot with companies boasting of sound balance sheets and free cash flows. By and large, being a conservative fund house, they steered clear of capital goods manufacturers and real estate companies and stuck to strong fundamentals. Naturally, they were penalised for it in terms of returns as the market's attention was elsewhere.
When one looks at the current market decline, their relative performance certainly does impress when compared to its peers.
Its star performers, Franklin India Bluechip and Franklin India Prima Plus, also amongst India's oldest private sector funds, have managed to stay strong in the recent market debacle. Though, by their very own admission, they do have some work to do on the mid-cap fund - Franklin India Prima.
The early years of Templeton were not impressive. The acquisition of Pioneer ITI in 2002 was the best thing that happened to it.
Pioneer ITI was the first AMC to launch open-ended funds in India. It started off as Kothari-Pioneer, a joint venture between the Chennai-based Shyam Kothari family (through ITI, Investment Trust of India) and the U.S.-based Pioneer Group in 1993.
In 2000, ITI was acquired by TCK Finance and in 2001 the AMC was called Pioneer ITI. Soon after, Pioneer was acquired by UniCredito Italiano, an Italian bank. In March 2002, Templeton acquired Pioneer ITI. Thanks to the acquisition, Templeton acquired some star performers and a great fund management team (the entire team was retained). Ravi Mehrotra, who came over as Pioneer ITI's CIO, was appointed as CEO of Templeton and when he quit in 2005, he was President, Franklin Templeton India.
The acquisition instantly made Franklin Templeton the largest AMC in 2002. But over the last few years, the fund house has lost significant market share. But they do not seem too perturbed by it simply because they are convinced they did the "right thing". There was no NFO mania here, neither did they go overboard with exotic products and refused to pursue short term opportunities, be it in stock selection or fund launches. Where they are rightly concerned is on the performance front where they have undoubtedly faltered.
The fund house has now put together a well structured research team of seven dedicated analysts. They have enhanced their market coverage and fine tuned their investment management processes. They are confident that in the next few years, their convictions will translate into a significant and sustained performance improvement.