FT MF puts investment limits on FoF to deter arbitrage-seeking flows

The fund of funds (FoF) of Franklin Templeton Mutual Fund (FT MF), which had part of their debt allocation to two of the schemes under wind-up, have put daily limits on maximum investment.

For Franklin India Dynamic Asset Allocation Fund of Funds (FIDAAF), the limit has been placed at Rs 200,000 per day per investor. For Franklin India Multi-Asset Solution Fund (FIMAS), the limit has been pegged at Rs 100,000.

“In limiting inflows into the FoFs, our attempt is to gate any arbitrage opportunities available to new investors while protecting the interest of existing investors,” said a spokesperson for FT MF.

The four life stage-based funds meant for financial planning -- part of Franklin India Life Stage Fund of Funds (FILSF) -- have been put under Rs 25,000-Rs 50,000 investment limits.

No upper limit has been placed on 50’s Plus Floating Rate Plan.

FIDAAF and FIMAS had exposure to Franklin India Short Term Income Plan, which is under wind-up.

The four of Franklin’s life-stage FoF schemes had exposure to Franklin India Dynamic Accrual Fund.

MF advisors say the investment limits are being put in place so that arbitrage-seeking high networth investors (HNIs) are deterred from making investments into these funds.

“As the underlying schemes under wind-up start to see recovery and receive cash flows, the net asset values of the FoF schemes will see a recovery too,” said Amol Joshi, founder of Plan Rupee Investment Services.

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