Things indeed have been less than perfect for the mutual funds industry as a result of economic slowdown as well as specific events, key among which is the value deterioration across a number of industries and asset classes. The onset of COVID-19 has served to exponentially compound these problems. The most recent victim of the current situation is Franklin Templeton India, which announced its decision to wind-up six debt schemes, citing this as the only viable option to preserve value for unitholders and enable an orderly and equitable exit for all investors.
AMFI, the mutual fund industry body, has tried to assure investors that majority of fixed income AUM is invested in superior credit quality securities and schemes have appropriate liquidity to ensure normal operations. Mutual funds are not one homogenous mass and separate schemes have different investment strategy and underlying assets, but the supervening effect of the ongoing pandemic has created such redemption pressures and corresponding lack of cash flows, that the mutual fund industry has been dealt a body blow by the ensuing demand-supply liquidity mismatch.
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