SAN MATEO, Calif. (HedgeWorld.com)–A retail-distressed debt fund is in the works at Franklin Resources Inc.
The closed-end Franklin Mutual Recovery Fund is moving through the approval process at the Securities and Exchange Commission, with Franklin recently making changes to its initial proposal, filed in February.
Franklin is taking a different approach with the fund, offering it mainly to long-time investors in one of its mutual fund families–the Mutual Series–and to other investors who meet a variety of specific criteria.
Franklin executives were not available for comment on the fund.
But according to the SEC filing, the main focus of the distressed fund will be existing Franklin investors, specifically those who owned shares of its Mutual Funds Series as of Oct. 31, 1996. The fund also will be sold to: individuals willing to put up US$5 million, registered investment advisers; institutional investors; affiliated employees of Franklin and their family members; investors buying shares with a redemption from Class Z shares of a Franklin fund; and defined contribution plans, among others.
The regular investment minimum is US$10,000, though certain types of investors will need to put up more. The base management fee is 1.5% of assets, and a performance fee of some sort will be included as well. The exact amount of the fee is not included in the current SEC filing.
The portfolio managers listed for the fund are David J. Winters, president, chief executive and chief investment officer of Franklin Mutual Advisers LLC and Michael Embler, a vice president. The main strategies to be used in the fund are: focusing on companies in bankruptcy and distress, using risk arbitrage, and buying undervalued stocks, the filing states.
Stradley Ronon Stevens and Young LLP, Philadelphia, is the fund’s legal counsel; Ernst & Young LLP, Boston, is the fund auditor; and an affiliated company, Franklin Templeton Services LLC, is the fund administrator.