Franklin Templeton India: The Cash Holding Dilemma

Franklin Resources Inc. is one of the largest and most respected global fund houses with a presence in India. The case highlights the structure, investment process and philosophy of its fund management team in India.<br><br>The case presents the specific issue of fund managers holding large amounts of cash during market downturns. There is one school of thought that attributes lower volatility and better risk-adjusted returns with high cash holdings. The other school of thought believes this approach goes against the philosophy of investment management. It believes people give money to fund managers to invest, not to hold in the form of cash. A fund should always be fully invested or nearly fully invested.<br><br>The chief investment officer at Franklin Templeton India is of the second school of thought and is faced with the challenge of convincing a team of young analysts and managers of its soundness. He presents a set of data to this team and asks them to analyze performance during periods of market downturns in order to arrive at a conclusion.

This case will give the students a strong overview of the Indian mutual fund industry, viewed through the lens of Franklin Templeton India and its chief investment officer. It will familiarize students with the specific characteristics of fund houses, such as their investment philosophy and beliefs, and their rules of thumb with respect to asset allocation, for example, cash holdings and timing the market. Students should realize portfolio management goes beyond number crunching. It involves risk analysis, promoters’ analysis and studying the business models of companies. The case also aims to acquaint students with performance measurement techniques commonly used in the industry.

• Asset allocation
• mutual fund
• portfolio performance
• India