Franklin Templeton expands fixed income lineup with new short-term debt fund

Franklin Templeton has launched the Franklin India Short Term Fund, an open-ended debt scheme that will invest in high-quality corporate bonds, government securities, State Development Loans (SDLs) and money market instruments, as asset managers continue to expand their fixed income offerings amid evolving interest rate expectations.

The new fund offer (NFO) will open for subscription on August 5 and close on August 11, while the scheme will reopen for continuous sale and repurchase from August 13.

The scheme will maintain a Macaulay duration of one to three years, positioning it in the short-duration debt fund category. It will predominantly invest in AAA- and AA+-rated corporate bonds, along with sovereign securities, according to the fund house.

The fund will be managed by Rahul Goswami, Chief Investment Officer and Managing Director, India Fixed Income, along with portfolio managers Anuj Tagra and Rohan Maru.

The launch comes as fund houses focus on fixed income products to cater to investors seeking relatively lower interest-rate risk than longer-duration debt funds while aiming for accrual-based returns.

Franklin Templeton said the investment strategy will focus on high-quality debt instruments and active duration management. According to the fund house, the shorter end of the yield curve currently offers opportunities supported by elevated yields, adequate liquidity and favourable demand-supply dynamics.

The scheme’s stated investment objective is to generate optimal returns over the short term by investing in a diversified portfolio of debt and money market securities. However, the fund house said there is no assurance that the investment objective will be achieved.The benchmark for the scheme will be the NIFTY Short Duration Debt Index A-II. The fund will have no exit load, and the minimum investment amount during the NFO is ₹5,000, with investments thereafter in multiples of ₹1.

As with all debt mutual funds, returns will depend on movements in interest rates, credit quality and market conditions. Investors should assess whether the fund’s risk profile and investment horizon align with their financial goals before investing.