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Here's how to get steady returns on investment
July 19, 2006

  • Type
  • Debt - Miscellaneous
  • Benchmark
  • Crisil Composite Bond Fund Index**
  • Min. Investment
  • Rs 10,000
  • Face Value
  • Rs 10
  • Entry Load
  • Nil
  • Exit Load
  • 4.00% (max.)*
  • Issue Opens
  • July 10, 2006
  • Issue Closes
  • July 31, 2006
    *4.00% in year 1; thereafter reduces by 1.00% every year to 1.00% in year 4; 0.50% for redemption between 48 to 54 months
    **25% S&P CNX 500 + 65% Crisil Composite Bond Fund Index + 10% Crisil Liquid Fund Index

     Investment Objective

    Franklin Templeton Fixed Tenure Fund Series VI is a closed-end income fund that seeks to provide investors steady returns along with capital appreciation through equity exposure.
    *Source: Offer Document

     Is this fund for you?

    Franklin Templeton Fixed Tenure Fund-Series VI (FTFTF-Series VI) is a close-ended income fund with 5-year investment tenure. It proposes to generate stable returns and capital appreciation. FTFTF-Series VI works on the proposition of combining the stability of debt with the power of equities.

    This in turn also offers investors the benefits of diversification across asset classes. Despite the fund's close-ended nature, investors will have the option to redeem their investments every 6 months over a pre-determined 7-day period; however an exit load will have to be borne on the same.

    The 10-year 7.59% GOI (Government of India) paper is presently yielding 8.36% (July 18, 2006), the highest we have seen over the last few years. In fact, only some days ago, it had peaked to nearly 8.50%. Combine that with the attractive level of the stock markets post-correction.

    Investors who invest in both these markets today and are willing to wait patiently over the long term (5 years in this case) are likely to get superior returns at relatively lower risk. To that end, FTFTF-Series VI presents an attractive investment proposition.

    The fund will appeal to investors with a moderate risk appetite who typically invest in fixed income instruments like fixed deposits, but are willing to take on some risk for clocking higher returns.

     Portfolio Strategy

    FTFTF-Series VI is mandated to invest atleast 70% of the corpus in debt instruments and can have an equity allocation of upto 30%.

    InstrumentsAllocation Range
    Debt securities and money market instruments70%-100%
    Equities and equity linked instruments0%-30%

    The fund has indicated that it will generally hold debt instruments till maturity. Hence by locking in the yield at the time of investment, the fund can minimise interest rate risk of the portfolio. The fund managers also have the flexibility to book profits in the last year and shift assets into liquid instruments.

    The fund can also park some portion (up to 50% of its assets) in derivatives if needed. Under normal circumstances the fund will stick to its asset allocation but there might be instances wherein the fund may alter the allocation from time to time on a short-term basis keeping in view market opportunities.

     Fund Manager Profile

    Santosh Kamath is CIO-Fixed Income at Franklin Templeton Mutual Fund. He is a B.E. and an MBA. Before joining Franklin Templeton, Kamath was associated with ING Investment Management (India) Pvt. Ltd as CIO-Fixed Income and with Zurich Asset Management Company (India) Pvt. Ltd as Fund Manager, among others. He will be handling the debt portfolio for FTFTF-Series VI.

    Satish Ramanathan, Vice President and Portfolio Manager, is the co-portfolio manager for FTFTF-Series VI and will be handling the equity portfolio. He is a B. Tech and an MBA. Ramanathan was associated with ICICI [Get Quote] Securities and Sundaram Mutual among other companies before joining Franklin Templeton.


    FTFTF-Series VI has indicated that it will adopt a conservative fund management style for both the debt and equity portfolios. On the debt side, the fund will largely invest in instruments with a relatively high credit quality i.e. the fund will refrain from taking on credit risk. Also its strategy of matching the maturity profile of debt instruments with the scheme's investment horizon will help in reducing interest rate risk.

    The fund can also benefit from Franklin Templeton Mutual Fund's process-driven approach to fund management, which is evident in the impressive performances clocked by funds like Franklin India Bluechip Fund and Franklin India Prima Fund over longer time frames.

    We believe FTFTF-Series VI promises to be a stable performer, which can deliver on its investment objective (steady returns with capital appreciation).

    Having said that, investors would do well to appreciate that unlike fixed deposits and small savings schemes, which offer assured returns, the fund is a market-linked investment avenue. Hence investing in the same entails taking on a greater degree of risk for clocking higher returns.

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