Franklin India Low Duration Fund – Direct (G) : NFO Details

Franklin Templeton Mutual Fund has launched the Franklin India Low Duration Fund – Direct (G), an open-ended debt scheme that aims to generate income by investing in debt and money market instruments with a Macaulay duration of 6 to 12 months. The fund falls under the Low Duration Fund category and offers a minimum subscription amount of ₹5,000. The New Fund Offer (NFO) opened on February 25, 2025, and will close on March 5, 2025. However, there is no guarantee of achieving its investment objective.

Details of the NFO: Franklin India Low Duration Fund – Direct (G)

Investment Objective and Strategy

Objective:

The objective of the Franklin India Low Duration Fund – Direct (G) is to generate income by investing in debt and money market instruments, with Macaulay duration of the portfolio between 6 to 12 months. However, there is no assurance that the investment objective of the Scheme will be achieved.

Investment Strategy:

To achieve the investment objective of generating returns in the fixed income market by actively managing the portfolio while maintaining a low duration. Franklin India Low Duration Fund – Direct (G) will invest in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months and 12  months.

Derivative products are leveraged instruments and can provide disproportionate gains as well as disproportionate losses to the investor. Execution of such strategies depends upon the ability of the fund manager to identify such opportunities. Identification and execution of the strategies to be pursued by the fund manager involve uncertainty and decision of fund manager may not always be profitable. No assurance can be given that the fund manager will be able to identify or execute such strategies. The risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

Risk Associated with Franklin India Low Duration Fund – Direct (G)?

• As with all debt securities, changes in interest rates may affect the Scheme’s Net Asset Value as the prices of securities generally increase as interest rates decline and generally decrease as interest rates rise. Prices of long-term securities.
• generally fluctuate more in response to interest rate changes than do short-term securities. Indian debt markets can be volatile leading to the possibility of price movements up or down in fixed income securities and thereby to possible movements in the NAV.
• Liquidity or Marketability Risk: This refers to the ease with which a security can be sold at or near to its valuation yield to-maturity (YTM).
• Credit risk or default risk refers to the risk that an issuer of a fixed income security may default (i.e., will be unable to make timely principal and interest payments on the security).
• This risk refers to the interest rate levels at which cash flows received from the securities in the Schemes are reinvested. The risk is that the rate at which interim cash flows can be reinvested may be lower than that originally assumed.
• As and when the Scheme trades in the derivatives market there are risk factors and issues concerning the use of derivatives since derivative products are specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds.
• There is the possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the “counter party”) to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices.

What are the Risk Mitigation Strategies of Franklin India Low Duration Fund – Direct (G)?

• The Franklin India Low Duration Fund – Direct (G) will undertake the active portfolio management as per the investment objective to reduce the market/interest risk. A well-diversified portfolio may help to mitigate this risk. Further, the Scheme may use Interest rate derivatives to mitigate the interest rate risks and rebalance the portfolio.
• Liquidity risk may be high on select securities due to duration and/or issue structure and/ or issuer specific risk. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. Further details on Liquidity management tools are provided below.
• Management analysis will be used for identifying company specific risks. Management’s past track record will also be studied. In order to assess financial risk a detailed assessment of the issuer’s financial statements will be undertaken.
• Reinvestment risks will be limited to the extent of coupons received on debt instruments, which may be a very small portion of the portfolio value.
• The Franklin India Low Duration Fund – Direct (G) may invest in derivative for the purpose of hedging, portfolio balancing and other purposes as may be permitted under the Regulations. Interest Rate Swaps will be done with approved counter parties under pre-approved ISDA agreements. Interest rate swaps and other derivative instruments will be used as per local RBI and SEBI) regulatory guidelines.