Franklin Templeton Mutual Fund enables side pocketing in its debt schemes

One of India’s largest mutual funds in the debt space, Franklin Templeton Asset Management has amended its schemes to enable side pocketing. Side Pocketing allows mutual funds to set aside a portion of their units in lieu of bad debt. The move comes closely on the heels of Ind-Ra’s downgrade of Vodafone Idea debt on 1st November to BBB. This rating is one notch above junk and a downgrade below this level triggers write-off among mutual funds as per a matrix set out by the Association of Mutual Funds of India (AMFI). Several schemes of Franklin Templeton are exposed to Vodafone Idea debt as Mint wrote here. Franklin India Credit Risk Fund, Franklin India Income Opportunities Fund, Franklin India Short Term Income Plan and Franklin India Dynamic Accural Fund have exposures of 4.39%, 3.56%, 3.54% and 2.18% respectively according to data from Rupeevest.

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