Before we head on to answer your queries on your investments in mutual fund schemes, here we clarify that last evening after the amc company Franklin Templeton was left with no option on barely any new subscription and other liquidity issues, closed 6 of its debt mutual fund schemes for redemptions as well as fresh investments.
What the stand by the AMC implies for investors in the schemes which have been closed?
The scenario which the company currently faces is that due to cash crunch in the market and extremely risk averse nature of investor amid the uncertainty surfacing due to coronavirus is not able to sell its investments precisely because there are no buyers in the market. And the huge redemption pressure is left unmet as investments are not being sold off.
Will investors' investments in these schemes remain stuck?
For some time may be unless and until the fund house liquidate its assets to pay of the money back to its unit holders. And as and when the liquidity in the bond market improves redemption proceeds shall be honoured as the AMC will be able to sale of its assets.
Until when can the investors in these closed schemes expect their money back?
This cannot be said with exactness and much depends on the conditions in the bond markets for most debt securities as also when the company will be able to liquidate its holdings.
Is there a threat to my other debt mutual fund investment?
At this difficult time, when cash has again become the king given the tumultuous volatility until your appetite allows do not give in to the risk parameter. And what you can do now is check on your debt mutual fund investment and analyse the risk element in their portfolio. Also, as per experts this fiasco can hit the debt market a bit too hard.
So, the need of the hour is to stay extremely careful as the debt market can face further redemption pressure owing to fear sentiment gripping the markets.Overnight funds are the most safe if you are highly risk averse and the last call be to invest in mutual funds with good credit quality.