Franklin Templeton Seeks Fixed Income Opportunities to Drive Growth in India

Franklin Templeton Aims to Regain Ground in India's Mutual Fund Market

Franklin Templeton is betting on the growing interest of Indian investors in fixed income to drive its growth in the country, where it suffered a setback six years ago due to a credit crunch. The fund manager, which oversees more than Rs 1.2 lakh crore ($12.6 billion) of assets in India, is expanding its fixed income offerings and launching new products across retirement schemes, specialized investment funds, and alternatives.

Currently, equities make up around 90% of Franklin's mutual fund assets in India, with a goal to reduce this to around 60% without shrinking the firm's exposure to equities. This shift requires a significant growth in fixed income assets. To achieve this, Franklin Templeton is focusing on building assets in money markets and corporate bonds with medium- to long-term tenors.

The strategy is part of Franklin Templeton's efforts to move past the fallout of a painful period in 2020, when it shut six debt funds after freezing investor withdrawals due to a liquidity crunch. The local regulator barred it from offering new debt funds for two years and imposed a fine. The asset manager faces stiff competition from local fund houses, including HDFC Asset Management Company Ltd. and ICICI Prudential Asset Management, as well as global rivals such as BlackRock Inc. and Jefferies Financial Group Inc.

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Franklin Templeton's Renewed Push into Debt Funds

Franklin Templeton's renewed push into debt funds is expected to take place over the next three to five years. The firm plans to build assets in money markets and corporate bonds with medium- to long-term tenors. It has already built out its credit strategy into a long-term alternatives business over the last year, raising over Rs 5 billion for its credit alternatives fund and planning to expand that segment further.

The firm is looking to tap new customer segments in smaller towns and boost its offerings through the low-tax hub of Gujarat International Finance Tec-City (GIFT City). However, analysts remain cautious, citing the intense competition in debt mutual funds due to the limited set of institutional investors and large bank-backed mutual funds.

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According to Nirav Karkera, head of research at Groww's wealth management arm W, Franklin Templeton may still struggle to make a significant dent in fixed income schemes. However, Avinash Satwalekar, president of Franklin Templeton Asset Management (India) Pvt Ltd, is optimistic, citing the growing appeal of debt markets due to their relative safety. He believes that investors, who became under-allocated to debt instruments following a prolonged stock market boom in India, will see the value of fixed income in a diversified portfolio.

Franklin Templeton has stepped up hiring in India over the past few years and launched a debt fund in 2024, managed by Rahul Goswami, who joined as chief investment officer from ICICI Prudential Asset Management Co.