{"id":272,"date":"2019-05-08T13:49:24","date_gmt":"2019-05-08T13:49:24","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=272"},"modified":"2019-05-08T13:54:08","modified_gmt":"2019-05-08T13:54:08","slug":"franklin-india-overnight-fund-should-you-park-your-money-for-short-term-needs","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/05\/08\/franklin-india-overnight-fund-should-you-park-your-money-for-short-term-needs\/","title":{"rendered":"Franklin India Overnight Fund: Should Investors Park Your Short-term Needs?"},"content":{"rendered":"\n

After the defaulting\nepisodes of IL&FS and DHFL<\/a>, many liquid funds posted steep losses as they\nwere having exposure to these companies. It made the investors aware that debt\nfund investment isn\u2019t completely risk-free. <\/p>\n\n\n\n

While liquid funds<\/a> were\nwidely perceived to be a safe and better alternative to short-term deposits\noffered by banks, their popularity has waned in recent times.<\/p>\n\n\n\n

Investors have become more conservative and\nvying for options that are less risky. And the overnight fund is a plausible choice. <\/p>\n\n\n\n

Overnight fund is a\ncategory of debt scheme emerged after the SEBI\u2019s recategorization norms<\/a>.<\/p>\n\n\n\n

It has the shortest investment\nduration of one day and provides better returns than bank FDs and are more\nliquid. The interest rate risk involved therein is near\nzero. However, there can be a reinvestment risk, i.e. overnight funds may not\nbe able to reinvest their proceeds at the same rate of return, but at least\nthat doesn’t cause any capital erosion.<\/p>\n\n\n\n

On the risk-return\nspectrum, overnight funds are placed lower that carries the least amount of\ninvestment risk.<\/p>\n\n\n\n

Graph:\nIndicative Risk Return Matrix -Debt Categories<\/em><\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n


\n(Source:\nPersonalFN Research)<\/p>\n\n\n\n

Several fund houses saw\nthis as an opportunity to win back investors\u2019 confidence with respect to debt\nfund investments<\/p>\n\n\n\n

Franklin India Mutual Fund<\/a> joined the bandwagon and launched an\nopen-ended debt scheme, Franklin India Overnight Fund (FIOF).  It will invest predominantly in debt &\nmoney market instruments having a maturity of one business day. <\/p>\n\n\n\n

Thus, it is suitable for conservative investors who want to park their\nmoney for a time period of one month or less than a year.<\/p>\n\n\n\n

Table 1: NFO Details<\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n
Type<\/strong>\n<\/td>\nAn open-ended debt scheme investing in overnight securities.\n<\/td>\nCategory<\/strong>\n<\/td>\nOvernight Fund\n<\/td>\n<\/tr>\n
Investment Objective<\/strong>\n<\/td>\nThe Scheme intends to provide reasonable income along with high liquidity by investing in overnight securities having a maturity of 1 business day. \n
There can be no assurance that the investment objective of the scheme will be realized\n\n<\/td>\n<\/tr>\n
Min. Investment<\/strong>\n<\/td>\nRs 5,000 and in multiples of Re 1 thereafter\n<\/td>\nFace Value<\/strong>\n<\/td>\nRs 1,000 per unit\n<\/td>\n<\/tr>\n
Plans\u00a0<\/strong>\n<\/td>\n
    \n

  • Direct*<\/p><\/li>

  • Regular<\/p><\/li><\/ul>\n
    * Default option\n<\/td>\n
Options<\/strong>\n<\/td>\n
    \n

  • Growth*<\/p><\/li>

  • Dividend<\/p><\/li><\/ul>\n
      \n

    • Re-investment Facility<\/p><\/li>\n

    • Pay-out Facility<\/p><\/li><\/ul>\n
      * Default option\n<\/td>\n<\/tr>\n

Entry Load<\/strong>\n<\/td>\nNot Applicable\n<\/td>\nExit Load<\/strong>\n<\/td>\nNil\n<\/td>\n<\/tr>\n
Fund Manager<\/strong>\n<\/td>\nMr Pallab Roy and Mr Umesh Sharma\n<\/td>\nBenchmark Index<\/strong>\n<\/td>\nCRISIL Overnight Index\n<\/td>\n<\/tr>\n
Issue Opens<\/strong>\n<\/td>\nMay 7, 2019\n<\/td>\nIssue Closes: <\/strong>\n<\/td>\nMay 8, 2019\n<\/td>\n<\/tr>\n<\/tbody><\/table>\n\n\n\n

(Source: Scheme\nInformation Document<\/a>)<\/p>\n\n\n\n

How will franklin India Overnight Fund\nallocate its assets?<\/strong><\/p>\n\n\n\n

Under normal circumstances, the\nscheme\u2019s asset allocation<\/a> pattern will be as under:<\/p>\n\n\n\n

Table\n2: FI<\/em>OF\u2019s Asset Allocation<\/em><\/strong><\/p>\n\n\n\n\n\n\n
Instruments\n<\/th>\nNormal Allocation#\n<\/th>\nRisk Profile\n<\/th>\n<\/tr>\n
Debt & Money Market Instruments including cash & cash equivalent^ with residual maturity up to one business day\n<\/td>\nUp to 100%\n<\/td>\nLow\n<\/td>\n<\/tr>\n<\/tbody><\/table>\n\n\n\n

^Investment\nin Securitized debt up to 10%<\/p>\n\n\n\n

#The scheme may have exposure in the following:<\/p>\n\n\n\n

1.Repos in corporate debt securities in accordance with the directions issued by RBI and SEBI from time to time.
2. Securities Lending – A maximum of 40% of net assets may be deployed in securities lending and the maximum single party exposure may be restricted to 10% of net assets outstanding at any point of time. <\/p>\n\n\n\n

The\nScheme shall not engage in securities borrowing and short selling activities.\nThe Scheme shall not invest in REITs, InvITs, foreign securities and foreign\nsecuritized debt. <\/p>\n\n\n\n

It\nmust be clearly understood that the percentages stated above are only\nindicative and not absolute and that they can vary substantially depending upon\nthe perception of the Investment Manager, the intention being always to seek to\nprotect the interests of the Unitholders. The asset allocation pattern\ndescribed above may alter from time to time on a short-term basis on defensive\nconsiderations, keeping in view market conditions, market opportunities,\napplicable regulations and political and economic factors (i.e., for reasons\nother than downgrade in rating) and would, in such cases, shall be rebalanced\nwithin 7 days from date of deviation. However, if the asset allocation pattern\nis to be altered for other reasons, as this is a fundamental attribute, the\nprocedure outlined in the paragraph on fundamental attributes below, shall be\nfollowed.<\/p>\n\n\n\n

(Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n

What will be the Investment Strategy?<\/strong><\/p>\n\n\n\n

The primary objective of the scheme is to\nprovide reasonable income along with high liquidity by investing in overnight\nsecurities having a maturity of 1 business day. The scheme strives to provide\nsteady income and high liquidity through a judicious mix of short-term debt and\nmoney market instruments. <\/p>\n\n\n\n

The scheme aims to identify securities in\nthe short-term instruments including Tri-Party Repos (TREPS), Reverse repos,\ndebt instruments with overnight maturity. The scheme intends to hold short-term\nsecurities to minimize price volatility.<\/p>\n\n\n\n

Who will manage the Franklin India\nOvernight Fund?<\/strong><\/p>\n\n\n\n

The Franklin\nIndia Overnight Fund will be managed by Mr Pallab Roy and Mr Umesh\nSharma.<\/p>\n\n\n\n

Mr Pallab\nRoy<\/strong> is an Assistant Vice President and Portfolio\nManager of Fixed Income at the AMC.  He holds\na master’s degree in commerce from Rani Durgavati University, Jabalpur and\nearned his M.B.A from IMS(UD), Devi Ahilya University Indore and diploma in\nbusiness finance from ICFAI, Hyderabad. He has a total work experience of 17\nyears in investment and research.<\/p>\n\n\n\n

Mr Roy has been associated with Franklin\nTempleton Asset Management (India) Pvt. Ltd. since June 2001 and is responsible\nfor Liquidity Management & Portfolio MIS of Fixed Income funds. <\/p>\n\n\n\n

Currently, some of the other schemes managed\nby him at the fund house include, Franklin\nIndia Floating Rate Fund<\/a>, Franklin\nIndia Liquid Fund<\/a>, Franklin\nIndia Savings Fund<\/a> and Franklin\nIndia Ultra-Short Bond Fund<\/a><\/p>\n\n\n\n

Mr\nUmesh Sharma<\/strong> is currently the Vice President and\nPortfolio Manager of Fixed at Franklin Templeton Asset Management (India) Pvt.\nLtd. and has 18 years of work experience in investment and research in the\nIndian financial service industry.<\/p>\n\n\n\n

Mr Sharma is a qualified Chartered\nAccountant and a Company Secretary. He is a Chartered Financial Analyst (CFA)\nCharterholder from Association of Investment and Management Research, USA.<\/p>\n\n\n\n

Prior to joining Franklin Templeton Mr\nSharma has worked with Religare Asset Management Company Pvt. Ltd., (erstwhile\nLotus India Mutual Fund) as a Portfolio Manager responsible for managing fixed\nincome bond portfolios for four years. Before that, he has been associated with\nICICI Bank, JM Financial Mutual Fund and UTI Mutual Fund.<\/p>\n\n\n\n

Currently at the fund house Mr Sharma manages\nFranklin\nIndia Government Securities Fund<\/a>, Franklin\nIndia Dynamic Accrual Fund<\/a>, Franklin\nIndia Banking & PSU Debt Fund<\/a>,  Franklin\nIndia Floating Rate Fund<\/a>, Franklin\nIndia Corporate Debt Fund<\/a>, Franklin\nIndia Liquid Fund<\/a>, Franklin\nIndia Savings Fund<\/a>, Franklin\nIndia Debt Hybrid Fund<\/a> (Debt portion), Franklin\nIndia Equity Hybrid Fund<\/a> (Debt Portion), Franklin\nIndia Pension Plan<\/a> (Debt Portion) and Franklin India Fixed Maturity Plans-Series\n1 to Series 6<\/p>\n\n\n\n

Table 3a:<\/strong> Performance of schemes managed by <\/em><\/strong>Mr\nPallab Roy and Mr Umesh Sharma<\/em><\/strong><\/p>\n\n\n\n\n\n\n\n
Scheme Name\n<\/th>\nSI Benchmark Name\n<\/th>\nManaging Since\n<\/th>\nScheme Return (%)\n<\/th>\nBenchmark Return (%)\n<\/th>\n<\/tr>\n
Franklin India Floating Rate Fund\n<\/td>\nCrisil Liquid Fund Index\n<\/td>\nJan-2011\n<\/td>\n6.64\n<\/td>\n8.08\n<\/td>\n<\/tr>\n
Franklin India Savings Fund\n<\/td>\nJun-2008\n<\/td>\n8.07\n<\/td>\n7.58\n<\/td>\n<\/tr>\n<\/tbody><\/table>\n\n\n\n

(Performance data as on May 8,\n2019)<\/p>\n\n\n\n

(Source: ACE MF)<\/p>\n\n\n\n

Table 3b:<\/strong> Performance of schemes managed by <\/em><\/strong>Mr\nUmesh Sharma<\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n
Scheme Name\n<\/th>\nBenchmark Name\n<\/th>\nManaging Since\n<\/th>\nScheme Return (%)\n<\/th>\nBenchmark Return (%)\n<\/th>\n<\/tr>\n
Franklin India Banking & PSU Debt Fund\n<\/td>\nCrisil Composite Bond Fund Index\n<\/td>\nApr-2014\n<\/td>\n8.14\n<\/td>\n8.89\n<\/td>\n<\/tr>\n
Franklin India Dynamic Accrual Fund\n<\/td>\nJul-2010\n<\/td>\n8.67\n<\/td>\n8.01\n<\/td>\n<\/tr>\n
Franklin India Corp Debt Fund\n<\/td>\nCrisil Short Term Bond Fund Index\n<\/td>\nJul-2010\n<\/td>\n9.05\n<\/td>\n8.18\n<\/td>\n<\/tr>\n<\/tbody><\/table>\n\n\n\n

(Performance data as on May 8,\n2019)<\/p>\n\n\n\n

(Source: ACE MF)<\/p>\n\n\n\n

Table 3c:<\/strong> Performance of scheme managed by <\/em><\/strong>Mr Pallab Roy<\/em><\/strong><\/p>\n\n\n\n\n\n\n
Scheme Name\n<\/th>\nBenchmark Name\n<\/th>\nManaging Since\n<\/th>\nScheme Return (%)\n<\/th>\nBenchmark Return (%)\n<\/th>\n<\/tr>\n
Franklin India Ultra Short Bond Fund\n<\/td>\nCrisil Liquid Fund Index\n<\/td>\nDec-2016\n<\/td>\n8.73\n<\/td>\n7.17\n<\/td>\n<\/tr>\n<\/tbody><\/table>\n\n\n\n

(Performance data as on May 8,\n2019)<\/p>\n\n\n\n

(Source: ACE MF)<\/p>\n\n\n\n

As can be seen, the funds managed by fund\nmanagers have marginally outperformed than the Benchmark, hence the management\nstyle is modest.<\/p>\n\n\n\n

The outlook for Franklin India Overnight\nFund:<\/strong><\/p>\n\n\n\n

Franklin\nIndia Overnight Fund intends to achieve the objective by investing predominately\nin overnight securities. So, the fund managers may invest in securities that could\nbe listed, unlisted, publicly offered, privately placed, secured, unsecured,\nrated or unrated. <\/p>\n\n\n\n

The\nsecurities may be acquired through public offerings (IPOs), secondary market\noperations, private placement, rights offer or negotiated deals. It may also\nenter into repurchase and reverse repurchase obligations in all securities held\nby it as per the guidelines and regulations applicable to such transactions.<\/p>\n\n\n\n

Government\nand Public Sector Enterprises are the predominant borrowers in debt markets. Initially,\nthe debt markets were regularised, and the interest rate was in line with the\nrepo rates.  But lately there has been\nrapid deregulation and currently, both the lending and deposit rates are market\ndetermined. <\/p>\n\n\n\n

Hence, the\nactual yields of the Franklin India Overnight Scheme will vary in line with\ngeneral levels of interest rates and debt\/money market conditions prevailing\nfrom time to time. Franklin India Overnight Fund will be sensitive to systemic\nliquidity. Excess liquidity may drag the potential return down and vice-versa.<\/p>\n\n\n\n

However, if\nyou are extremely conservative and wish to park money for the very short-term,\nsay from day to a week, one can consider an overnight fund as a substitute for\nholding money in a savings bank account. <\/p>\n","protected":false},"excerpt":{"rendered":"

After the defaulting episodes of IL&FS and DHFL, many liquid funds posted steep losses as they were having exposure to these companies. It made the investors aware that debt fund investment isn\u2019t completely risk-free. While liquid funds were widely perceived to be a safe and better alternative to short-term deposits offered by banks, their popularity…<\/p>\n","protected":false},"author":4,"featured_media":274,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/272"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=272"}],"version-history":[{"count":3,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/272\/revisions"}],"predecessor-version":[{"id":277,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/272\/revisions\/277"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/274"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}