Franklin Templeton has become the latest fund house to offer a ‘side pocket’ to investors in its fixed-income schemes hit by ratings downgrade of debt securities issued by crisis-hit Vodafone Idea. Tata MF in June 2019 became the first fund-house to actually opt for side pockets in three DHFL-exposed debt schemes.The inclusion of provision to enable creation of segregated portfolio in the aforesaid Scheme(s) constitute change in fundamental attributes of the Scheme(s). SEBI/HO/IMD/DF2/CIR/P/2018/160 dated December 28, 2018.The term ‘segregated portfolio’ means a portfolio, comprising of debt or money market instruments affected by a credit event, that has been segregated in a mutual fund scheme. The fund house has come under criticism on social media for this delayed cutoff date for receipt of side pocketed units.“Vodafone Idea has been written down, but credit risk in debt funds is far from over. Additional read: UTI, Nippon, ABSL MF schemes write down Vodafone Idea exposure after Franklin move. downgrade in credit rating by a SEBI registered Credit Rating Agency (CRA), as under:• Downgrade of a debt or money market instrument to ‘below investment grade, orFund-houses usually will not charge investment and advisory fees on the segregated portfolio.Franklin Templeton Mutual Fund proposes to include provisions related to creation of segregated portfolios in the Scheme Information Document (SID) of Franklin India Liquid Fund, Franklin India Overnight Fund, Franklin India Floating Rate Fund, Franklin India Savings Fund and Franklin India Government Securities Fund.Other schemes for the segregated portfolio development include Franklin India Corporate Debt Fund, Franklin India Dynamic Accrual Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Plan, Franklin India Income Opportunities Fund, Franklin India Ultra Short Bond Fund, Franklin India Credit Risk Fund, Franklin India Banking & PSU Debt Fund, Franklin India Equity Hybrid Fund, Franklin India Debt Hybrid Fund, Franklin India Pension Plan and Franklin India Equity Savings Fund.“We have received approval from the Board of Directors of the Franklin Templeton Asset Management (India) Pvt. This procedure segregates bad debt and allows investors to exit the rest of the scheme without giving up on the chance of recovery in the bad debt. The term ‘main portfolio’ means the scheme portfolio excluding the segregated portfolio and the term ‘total portfolio’ means the scheme portfolio including the securities affected by the credit event.The segregated portfolio is created, in case of a credit event at issuer level i.e. Fresh investors also cannot take advantage of recovery in the bad debt. Investors should carefully look at portfolios before entering such schemes. Franklin Templeton Mutual Fund has proposed to include provisions related to creation of segregated portfolios in 17 schemes, effective December 26, 2019In order to ensure fair treatment to all investors in case of a credit event and to deal with liquidity risk, SEBI has permitted creation of segregated portfolio of debt and money market instruments by mutual funds schemes vide SEBI circular No. On 24th January, Franklin Templeton Mutual Fund side pocketed its holdings of Vodafone Idea debt. said Amol Joshi of Plan Rupee Investment Advisors.Log in to our website to save your bookmarks. Kumar is a financial journalist, with a functional experience of 15 years. Franklin Templeton MF, which has 62 percent (Rs 1,738 crore) exposure in Vodafone Idea (VIL) - the highest, was also the the first fund house to mark down its investment in the company to zero. Franklin Templeton Mutual Fund has proposed to include provisions related to creation of segregated portfolios in 17 schemes, effective December 26, 2019 It'll just take a moment.You are now subscribed to our newsletters. If they cannot do this analysis, they must focus on the process being followed and fund manager expertise – is it sufficiently robust?" Ltd. (investment manager for schemes of Franklin Templeton Mutual Fund) and Franklin Templeton Trustee Services Pvt. The redemption request for this purpose may be submitted at any of Official Points of Acceptance of Transactions (OPAT) of Franklin Templeton Mutual Fund, and the NAV applicable will be based on the day and time the application is received at any of the designated OPAT.Unitholders who do not exercise the exit option on or before 3.00 p.m. on December 24, 2019 would be deemed to have consented to the proposed change.However, the exit option without load will not be available to investments in the said Scheme(s) made on or after November 25, 2019. Franklin Templeton MF uses side pocketing to segregate Vodafone Idea holdings The fund house uses side pocketing to mitigate risks in six affected schemes. Ltd. (the Trustee to the schemes of Franklin Templeton Mutual Fund), to include provisions related to creation of segregated portfolios in the Scheme Information Document (SID) of respective Schemes,” the fund-house said in an investor communique.Besides Franklin Templeton MF, fund houses like Aditya Birla Sun Life MF, Sundaram Mutual Fund and other fund-houses have also announced changes in the SIDs of many funds providing for side pocketing. Unitholders who have pledged their units will need to procure a release of their pledge prior to submitting their redemption request.The offering will invest 50% of its assets in Indian equities, 20% in international equities, 15% in commodities; NFO opens on Aug 7 and closes on Aug 21The new scheme will invest in a basket of 12 most liquid banking stocks of Nifty Bank Index, which consist 9 private sector lenders and 3 PSU banksInvesting in section 54EC bonds helps investors save taxes on long-term capital gains from real estate He can be contacted at kumarsroy@rupeeiq.com. Franklin Templeton MF Side Pockets Exposure to Vodafone Idea. That move came on a day when Supreme Court rejected the company’s plea to review payment of … In terms of prevailing regulatory requirements, unitholders in the aforesaid Scheme(s) are given an option to exit at the prevailing Net Asset Value (NAV) without any exit load, in case they do not wish to continue in the said Scheme(s) in view of the change in the fundamental attribute.The period of this no load exit offer is from November 25, 2019 to December 24, 2019 (both days inclusive).