I parked my emergency fund in Franklin India Ultra Short Bond Fund. Now, they have extinguished all units in the segregated portfolio. Hopefully, the money will keep coming back. Where and how should I re-invest this money for the same purpose?
- Manas Gupta
Yes, congratulations! Franklin India Ultra Short Bond Fund has completely wound up its segregated portfolio, which got created on January 24 and Franklin, in July, credited the money to investors' account by cancelling those units. So, that is quite a relief for all investors. Also, this brings a good message that the side-pocketing law, which was enacted by the regulator, has been helpful. Had this law not been there, investors would have exited the fund and lost this opportunity. Further, the fund would have declined in value and new investors would have entered the fund, thereby benefiting from any recovery. So, side-pocketing ensures that only the real beneficiary gets the benefits of the recovery.
Given this, it has been a very good experience and it is actually a validation of the entire hypothesis that the investors who were the then owner of the funds are the ones getting the benefit. Of course, there was a little bit of anxiety.
Franklin has come up with a communication that they have got about 14 per cent of the money of their ultra-short-term-bond fund but they are unable to return it to investors because of court cases. I think it is going to be a very prudent thing for the court to explore the possibility to return investors' money lying with the fund at the earliest. The money is stuck because of the procedural vote which is mandated by the law. So, I do not know what happens there, but you can expect about 14 per cent of your money if the court order comes in handy.
With regard to what you should do with this money, I think somebody who has had this nasty or unpleasant experience should err on the side of caution. It is better to earn a little lower return than trying to maximise the return on a fixed income. I would suggest investing in short-duration funds which are also part of our Best Funds Book - HDFC Short Term Debt Fund, Axis Short Term Fund, IDFC Bond Fund Short Term Plan and L&T Short Term Bond Fund.
You can consider these funds. They may not give you the kind of return that Franklin India Ultra Short Bond Fund gave but it is okay to earn a little less but with enough surety.