Franklin Templeton and the courts
So a bunch of investors have gone to court to teach “Franklin Templeton” a lesson? Did they approach FT and say “Pay us on the side and we will withdraw”? I do not know, but I know the investors in this country, and the courts just too well, so your guess is as good as mine.
What do some of them want from the courts? I do not know, but I can guess that mostly
a) Investors want their money
b) advisors are feeling that they have been “fooled” by FT and they want their pound of flesh, so what if their investors suffer
c) some people who do not have much at stake want a “legal process” to be set so that some less scrupulous fund houses do not misuse the winding-up process
d) some people want the consent of the unitholders to change the terms of the agreement – it is no longer an open-ended fund, so there is a breach, so that has to be set right.
e) some competitors may want the whole process to be delayed so that FT finds it difficult to make a come-back and difficult to hold on to its investors, vendors, and employees
f) some funds waiting on the wings might want to buy the fund house – lock stock and barrel.
Why the funds already lying in the bank can’t be given to the unit-holders? I do not know.
If FT were to be prosecuted, how is this 500 crores lying in the bank help the court? or our intellectuals? or our ‘Journalists’ or…of course they get viewership, but other than that?
So here I am wondering what is the advantage of people going to court?
I am not as intelligent as some of the IFA who write, tweet, etc. or like other journalists…so will somebody elucidate what is the benefit of going to court?
Let me disclose I, my family, friends, relatives and clients have an exposure to FT and I have a vested interest in the money coming back early. In case of Ultra short bond fund, there is money lying in the bank account and earning 2% p.a. The lawyers will have a good time.
So about Rs. 950 crores is lying in the bank, and some investors have made sure that this cannot be distributed to the unit-holders. It also means that some mutual fund houses are very happy with this development.
Karma catches up one day. It will.
Pradeep
I guess those who went to court want to paid fully and now. That means the 500 cr will not be divided among all investors and it becomes like tranche payments. These people do not want any losses if any bond default happens later.
I hope court takes care of interest of all investors.
Aditya S
sir, i read your blog and i found it very practical. here is something that you could spread to other IFAs. there are two CEOs of Indian AMCs that are spreading a message in a very careful way that all “foreign” AMCs will vanish. when it comes to financial services, the indian companies know how to defend their turf by using all means possible.
many years ago, the foreign banks had an advantage over indian banks with good technology, ATMs and high service standards. they were capturing the cream segment in the urban areas. what happened then? there was a regulation passed that even ATMs need a license from RBI. who lost the most? foreign banks. next regulation was on branch expansion. the regulator was reluctant to give new branch licenses to the foreign banks. who lost? again the foreign banks. next was the regulation on branch expansion where they said that for every x number of branches a foreign bank opens in an urban area they need open y number of branches in semi urban/rural areas. this killed their growth. at our peak, we had citi, hsbc, scb, barclays etc expanding their networks and adding people. now they are curtailed. now foreign banks are marginal players in most of the segments. mission accomplished.
insurance – newyork life, ing, aviva etc were doing well. what happened to all of them? message here is, if you want to be a partner in an Indian JV be a silent partner. bring your capital and take what we give in return – thats the message from indian financial services companies.
coming to mutual funds – the message that is being spread by 2 CEOs of bank sponsored AMCs :
1. we are indian and we will remain here
2. the foreign companies are not bothered about india and they will leave
3. over the next few years, bank sponsored AMCs will have over 80% marketshare and people will trust only them
what is the implication for IFAs?
1. once it is just a few players left running the show, the bargaining power of pricing will go away from the IFAs
2. globally, independent asset managers are most favored due to their focus on the core business of asset management and enjoy majority of the market share. the IFAs will have very little choice in choosing an independent asset manager.
3. many global banks exited their asset management business due to lack of focus. this could happen in india too.
4. we all know what happened during TER cut last year. the large indian AMCs ruthlessly cut the trail commission for the IFAs
5. the large bank sponsored AMCs will have their own bank as their largest partner in sales and you will always be given step motherly treatment (barring a few very large IFAs or one or two AMCs)
6. once you are at their mercy for pricing, you lose it. IFAs will be at a huge disadvantage for many years to come. RIA is the preferred mode for all these bank sponsored AMCs and they are also driving the agenda with AMFI and SEBI
what is the implication of FT taking this hit for IFAs?
1. FT always showed their channel bias towards IFAs. they spent decades in providing high quality training and treated IFAs with a partnership approach. when i had an issue with their pricing their regional head explained me the logic of sharing and being fair to both the parties. they showed this commitment when they did not cut our trail commissions on the old assets (at below a threshold) last year
2. The indian AMCs know that FT enjoys a lot of brand equity and is very popular with IFAs with this approach. they also know that FT has the strength in both equity and debt to deliver performance and give a tough competition to the bank sponsored AMCs. They are taking this opportunity (only 2 CEOs) to create this kind of bad will for FT and kill it.
what should the IFAs do?
1. Please maintain high AUMs with only independent asset managers. the bank sponsored indian AMCs will cut your pricing ruthlessly in the years to come.
2. since FT is in a bad shape, please work other independent guys but dont grow big with these bank sponsored AMCs. they will kill your business in years to come by cutting your trail commissions.
sirkalivignesh
subra,
if we dont plug this out and clear the regulations for winding up intrepretation tomo every tom and harry will do the same for the poor retail investors. yes courts take time to resolve. (Here time bound 3 months ) . FT is not gonna pay the full amount now if evote is positive (Max 40 % only gonna come this year) and rest still gets blocked. let the forensic report come out , appropriate actions need to be taken for making 3 Lakh investors into this level on AMC.
I respect your views on the market , finance .
This has happened in so called debt schemes which are atrocious and FT has completely ignored the investor interest in this.