An SPV for FT to purchase units held by us

By Sridhar MK, November 16 2020 08:55 PM

The shutting down of these open-ended debt funds by FT has the implication of complete cessation of redemptions, dividends, and of course, new subscriptions. It has seriously aggrieved the investor community, particularly a vast number of senior citizens, who depended on funds such as these to setup SWPs, or dividend flows, so as to augment pension plans, which were already heavily impacted by the low interest rate regime in the recent times. There have been instances reported in the press of investors being dependent on withdrawals from these funds even for purchase of monthly prescription medicines. I myself am among these thousands of senior citizen investors who had pinned our faith on the prudence of FT's fund managers, and continue to be in state of despair and disbelief that this situation of severe financial shock has befallen us.

This is to place on record heartfelt thanks to CFMA to bring to focus the central objective - that of FT returning our capital. I wish our esteemed legal minds could examine and propose a simple 2-step process to redress our immediate concerns, to be enforced by SEBI or another entity:

  1. FT to setup a special purpose Asset Holding Company (call it FTAHC, for now), and capitalize itself with a long term loan obtained from international sources (interest rates are as lower than 0.5% for long tenures today, and much lower than the 1.5% management fee FT used to charge us), using FT's current international standing.
  2. SEBI or other responsible agency to set up and oversee a system and process by which, the present unit-holders can opt to sell all, part, or none of the units they own in these six wound up schemes to FTAHC. The units should be purchased by FTAHC at the price prevailing as on April 23, 2020, the day FT announced closure of the funds, or on the date of transaction, whichever is higher. The purchase process could be taken up fund-by-fund in a time-bound manner, say, over a period of 3-6 months.
    This will satisfy all unit holders - a) those who want out of the schemes so that they can manage their immediate and urgent financial needs, as well as; b) those who wish to wait until securities mature and provide better returns in the future, or even be compensated at a later date for any deviations from regulations, should some ever be revealed in future.
    On its part, FT should ideally be pleased with this arrangement, for it can redeem its reputation by acting on the promise of returning money to unit holders without eroding value. Its trustees and managers will have opportunities to manage the same portfolio, now purchased from those who sold their units, with the same elan they were managing it for us all, and therefore to the satisfaction of themselves. They may even make a nifty profit over the medium term! This may help reduce the exodus of investors from their other equity linked funds.
  3. Once the unit holders in distress are out of the scene, all investigations into processes and/or people involved can begin in earnest to improve systems for the future.
    In conclusion, my humble request to CFMA would be to also give due precedence and priority to those of us unit holders, who want to redeem all our units and exit before the interventions and litigations by involved parties pose delays in getting back what little we have - we may not have lives that long.
Comments(1)
By Yethirajulu Vidyan, November 18 2020 06:58 PM
Sridhar Sir, Please understand that this issue is now TOTALLY in the hands of Hon. KHC. SEBI or FT AMC, NOBODY can do anything unless Hon. KHC gives the direct orders for the same! And courts will ONLY follow the written Regulations [of the Govt. appointed Regulator] which are already in place - that means existing SEBI regulations. In case, FT AMC DOES NOT conduct uinitholders consent vote by email-website logins before December 4th, then by Default on December 7th all 6 schemes will be fully opened by vacation of Hon. KHC stay order and there will be a mad rush of panic-herd mentality redemptions. It seems that in a distributor meet this month 1st week, FT has indicated there will be mark down of NAV [example- USBF UST funds maybe 30% mark down of NAV value in case of Re-Open of funds]. So, in that case of default Re-Open, then all redemptions will have 30% losses! In case unitholders votes to re-open the funds then old Year2016 SEBI rule of 2 lakhs per investor per day redemptions limit is there. But, then again there will be HUGE losses [CFMA is batting on 2 lakhs per investor per 10 days redemption limits]. FT AMC CAN in good faith buy all the 6 schemes assets and pay back all investors 100% fully. But, that means a 4 BILLION usd hit for FT-India which they WILL NOT be able to bear. FT USA could not care less for Indian investors in reality and they will not help at all. Hon. RBI-FM also not care now, as they have their hands really full with PMC-YES-LVB Banks failures and takeovers. SO, LAST AND FINAL BEST OPTION FOR INVESTORS-UNITHOLDERS, IS TO PRAY FOR THE VOTING TO START AND PLEASE ALL LET'S VOTE TO SIMPLY CLOSE THESE 6 SCHEMES PERMANENTLY SIR! Then in UST-USBF, you will get back 43% of cash positives quite quickly within 3 months. And within one year at least 90% of total investments will go directly to your demat bank account! Re-Opening has a lot of other problems involved and Hon. courts cannot understand the debt funds processes - SEBI is the real domain expert here and should have handled this FT closures issue right from the beginning itself. A markdown of any debt asset held by one AMC, will affect the same asset's valuations in ALL other AMC's as well. And this can trigger a contagion effect and cause total collapse of all Debt & Equity MF's in India also possibly! Equity NSE-BSE Markets will collapse totally too... Closures of the 6 schemes will mitigate all these issues, and provide a really smooth transition to transfer all of your NAV Holding units, into your Demat Bank account as cash really Sir! PRAY REALLY HARD THAT, FT AMC WILL SEND THE MAIL FOR VOTING SOON, AND PLEASE KINDLY JUST VOTE TO CLOSE THESE 6 FUNDS PERMANENTLY SRIDHAR SIR...... Courts WILL NOT listen to options as proposed by investors. KHC has denied and disposed the Intervening Petition of some investors for Cash Positive payouts. KHC has denied and disposed Khambhattas GHC-petition to rollback NAV's to April 22nd 2020 values. So, it is no use really to try and give Hon. KHC the suggestions as you have proposed. FT AMC will NEVER buy back our NAV units partially or fully also! ONLY Upon Closure of these funds we can get cash positives as payouts very quickly..