Tag: Franklin Templeton

Vodafone-Idea rating below investment grade: Here’s what MF experts have to say

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After market hours on Friday, Vodafone-Idea ratings by CRISIL and India Ratings slipped below investment grade putting mutual funds in a quandary. Franklin Templeton was the quickest to react, moving to segregate the exposure in 6 of their schemes.

Basically, four AMCs had exposure of about Rs 3,300 crore to Vodafone-Idea. The regulator Securities and Exchange Board of India (SEBI) has said that if the ratings of a particular issuer falls below investment grade, mutual funds (MFs) have the option now to side-pocket it. So, out of the four MFs that had this option, only Franklin Templeton has moved to segregate this exposure in six of their schemes. The three others are UTI, Aditya Birla and Nippon.

Earlier, Franklin had marked down to zero, the value of all of this exposure that it had to Vodafone Idea. The other AMCs had only taken mark-to-market hits but they have not yet moved to segregate the exposure.

However, there is some confusion on that since the rating action of the credit event happened post market hours on Friday, whether the Sebi guidelines of 24 hours would end on Saturday and therefore the three other AMCs that is UTI, Aditya Birla and Nippon would have already passed that timeframe to segregate at all, or whether it is 24 working hours, in which case it will end on Monday evening, and therefore they would have the time to talk to their trustees and take a call.

Feroze Azeez, deputy CEO of Anand Rathi Financial and Manoj Nagpal, MD & CEO of Outlook Asia Capital in an interview with CNBC-TV18 shared their views on the correct decision to make, which would be in the investor interest, on what the regulator feels about this, and on what the investors who still have investments to all of these affected schemes do.

Talking from regulator’s perspective, Nagpal said, “There are 3 methods to approach this entire situation. First is to put gates. All the 3 methods have been tried in India. In 2015, JPMorgan in case of Amtek Auto had used the first method and put gates – both purchase gates and redemption gates, so nobody could purchase nobody could redeem. That was constructive – the entire corpus went into a status quo.”

“The second method is, write down the value to the security to zero and limit the fresh purchases – that’s what Franklin Templeton did some time back,” he added. “The third is the segregated portfolio approach which is side-pocketing. Globally, side-pocketing only works for hedge funds. Mutual funds typically are not allowed to side-pocket. Hedge funds are also under a lot of scrutiny to side-pocket. So if hedge fund tried to side-pocket, there is a lot of regulatory oversight,” added Nagpal.

He further said that SEBI has changed track and feels side-pocketing is the best way to go.

Azeez said, “Side-pocketing is what I vote for 2-3 reasons. So if you look at some of the AMCs, at least the fund which has the largest Vodafone-Idea which is 17 percent. It was actually not 17 percent. Just a year back, the fund was Rs 5,200 crore in assets and it gradually has come to Rs 1,458 crore at the end of December. So, the fund manager would have decided to put 6 percent but since the assets shrunk it has now become 17 percent. So the long-term investors have got a dent in their portfolio because they have a paper which has been downgraded below the investment grade to the extent of 17 percent exposure.”

“Firstly,  if you don’t side-pocket, some short-term investors would take benefit of the long-term investor, the more passive investor  and any strategy which can dent a long-term portfolio investor is fundamentally incorrect,” added Azeez.

Secondly, there is one disadvantage of side-pocketing, and that is taxation, said Azeez because those units come to you for free and if we were to assume that one year from now, Vodafone actually pays up – that will be given as short-term capital gain. So, that taxation differential is the only demerit.”

Moreover, there is no logic for not doing side-pocketing, said Azeez.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s growth path can withstand any challenges post elections: Franklin Templeton

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As India gears up for the general election in April-May 2019, some risk-off sentiment seen towards Indian equities might have spooked some investors. But for Franklin Templeton, the country’s solid fundamentals continue to present a positive story for investors.

Sukumar Rajah, senior managing director and director of portfolio management, Franklin Templeton, believes that even if there is a surprise election result, the impact from uncertainty would be felt only in the short-term because fundamentals remain intact and it’s unlikely that investors will see any major changes made to legislation irrespective of whoever forms the new government.

“In the longer run, the case for investing in India remains strong as fundamentals appear solid and long-term growth drivers give us reason to look at India in a positive light,” Rajah said, in a report dated March 17, 2019.

According to the brokerage, if Narendra Modi is re-elected, India’s economic path will not see any material changes and even if Modi doesn’t win outright, it’s likely that Bharatiya Janata Party (BJP) will still form the new government, possibly as part of a coalition.

“Whatever the outcome of the election, there is little scope for any new government to implement radical, populist policies, due to the set up between the government and its dependency on the Reserve Bank of India to balance its budget deficit,” the report said.

With elections just a month away, the political parties have made a number of manifesto promises including farm loan waivers, subsidies, minimum income guarantee among others. A number of these measures could have significant fiscal implications for India’s economy and have raised eyebrows among many investors.

But according to Rajah, India’s growth path, underpinned by policies put in place since 2014 by Prime Minister Narendra Modi, is well-enough established to withstand any challenges.

“These policies, including the introduction of the GST, a revamped bankruptcy code, bank recapitalisation and increasing foreign direct investment limits across sectors, as well as the Make in India initiative, have helped India become the fastest-growing major emerging-market economy in 2018, at 7.3% GDP growth,” he said in the report.

“Projected gross domestic product growth for 2019 remains relatively robust at 7.5 percent and is estimated at 7.7 percent in 2020. By comparison, China’s economy is forecast to grow at a slower rate of 6.2 percent this year and in 2020,” forecasts the report.

The investment management company maintains that India is at a turning point for earnings growth. “The last few years for earnings growth have been challenging, due to the effects of demonetisation, implementation of GST and the impact of negative headlines from non-performing loans. We think it’s likely we’ll see a gradual improvement in earnings growth, which would be supportive for equities,” it added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

“Believe it or not” — Veteran EM fund manager Mark Mobius is betting on India’s troubled NBFCs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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At a time when most money managers are steering clear of India’s crisis-hit shadow banking firms, veteran emerging markets fund manager Mark Mobius is exploring aggressive contrarian bets on the sector.

Mobius‘ bet comes at a time when investors have been selling holdings in non-banking finance companies (NBFCs) after a series of defaults by India’s leading infrastructure finance company in September triggered contagion fears and prompted the government to step in and take control of the company.

“Believe it or not we are looking at non-banking finance companies,” Mobius told Reuters on Tuesday. “It looks crazy but everybody knows that the banking sector is in trouble.”

“Now is the time to start looking because the prices are down but that requires research. You got to look at these companies carefully.”

Mobius, who quit as head of Franklin Templeton’s emerging market funds in January, has started his own London-based Mobius Capital Partners that aims to pick up direct equity stakes in companies instead of buying exchange-traded funds to generate higher returns.

The fund, which has $160 million of assets under management so far since May, plans to invest $30 million to $40 million in India, said Mobius, 81, who has bet heavily on Indian assets in the past.

Mobius, who is awaiting for approval of registration of the investment firm by India’s market regulator, says he has already spoken to five NBFCs.

“It’s still very early days. We’ll have to visit them, sit down with them person to person and get a feel for what their thinking is.”

The debt woes of India’s Infrastructure Leasing & Financial Services led to a massive sell-off in finance companies which lost 32.7 percent since September dragging the broader BSE stock index down 11.7 percent.

Mobius Capital will earmark 20 percent of its investments each in India and Brazil followed by Turkey, Mexico, Vietnam, Taiwan and Korea which could see about 5-10 percent allocation each, Mobius said on the sidelines of Morningstar’s investment conference in Mumbai.

Mobius is looking to invest at a time when several foreign investors are pulling out of India due to uncertainties in the financial sector, rising oil prices, a weaker rupee, and fiscal worries ahead of general elections next year.

Foreign investors have pulled $13 billion out of India’s debt and stock markets since the start of 2018.

Despite this, Mobius said the investors in his company are bullish on India’s growth prospects and expect annual returns of 15-20 percent from equities in the next five years.

“All you have to do is tell them India is growing at 7 percent and they’re sold.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Expect continued volatility this year, Franklin Templeton says

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Global fund house Franklin Templeton believes that rapid adaption of information technology in emerging markets such as India and China have further propelled their strong growth.

Manraj Sekhon, emerging markets equity chief investment officer and Chetan Sehgal, director of portfolio management, Franklin Templeton Emerging Markets Equity, in a note on June 15 said, “We continue to see improvement in the earnings power and cash flow of many emerging market (EM) companies.”

The duo also said, “What we have seen so far in 2018 is a reminder that markets can be volatile, and we expect continued volatility this year.”

They added, “Nevertheless, we remain optimistic about the opportunities that we see in “new economy” sectors related to technology and consumption.”

EM companies have not only taken part in the technological revolution, but are also at the forefront, becoming global innovators in areas such as e-commerce, mobile banking, robotics and autonomous vehicles, they said, adding, “This development has created investment opportunities in a broad array of companies, ranging from internet firms to chip makers, hardware manufacturers and more.”

On specific sectors Sekhon and Sehgal said, “Rising wealth in emerging markets is another secular driver and we expect it to continue lifting demand for goods and services. Financials are also interesting to us, as improving macroeconomics in emerging markets create a potential tailwind for banks.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow