Franklin Templeton Investments launches three new Sicav funds

Date: Tuesday, August 21, 2007
Author: Hedgeweek.com

Franklin Templeton Investments, one of the world's largest asset managers with more than USD621bn in assets under management, has launched three new Sicav funds within its Luxembourg-domiciled Franklin Templeton Investment Funds range, including an absolute return fund investing in fixed-income instruments and derivatives.

Franklin Templeton says approval is currently being sought from the Financial Services Authority to register the new funds, the Templeton Global Absolute Return (USD) Fund, Franklin Strategic Income Fund and Franklin Natural Resources Fund, for sale in the UK.

The Templeton Global Absolute Return (USD) Fund builds on existing absolute return strategies within the Luxembourg Sicav range, seeking to invest in fixed-income and derivative instruments with the aim of achieving a positive absolute return in excess of the US dollar Libor rates by 180 basis points per annum, net of fees on A shares, regardless of the prevailing interest rate environment.

The fund may also invest in global bond and currency markets, allowing for diversification into non-correlated markets. In addition to traditional bonds issued by governments, agencies, mortgages and corporates worldwide, it may also invest in inflation-linked bonds, global high-yield bonds, emerging market debt, bank loans, preferred stock and municipal bonds.

The strategy aims to produce positive returns independent of traditional performance benchmarks in both bull and bear markets. The Templeton Global Absolute Return (USD) Fund is aimed at clients seeking for a specific return over a cash benchmark and willing to accept a controlled level of risk.

To broaden their investment opportunities, the managers may use the flexibility permitted under the European Union's Ucits III legislation for cross-border retail funds to access areas of the market they believe will generate the most alpha, to hedge and to protect against downside risk.

The fund may also invest in exchange-traded and over-the-counter derivatives, including foreign exchange forwards, interest rate futures and swaps, total return swaps and credit default swaps, both for risk-management hedging purposes and to implement a market neutral strategy.

The fund is co-managed by New York-based senior vice-president Robert Waldner, and London-based co-director John Beck, both of whom have more than 19 years of investment experience and are part of the Franklin Templeton fixed-income group which managed more than USD136bn in assets at the end of June.

The Franklin Strategic Income Fund aims to achieve long-term capital appreciation and provide a superior risk-adjusted total return for high-level income through the active management of a broadly based portfolio of income-generating fixed-income sectors.

The fund may invest in securities across the entire global universe of fixed-income, fixed and floating rate and investment grade and non-investment grade instruments, including bank loans, preferred stock, municipal bonds and floating rate/inflation-linked securities.

The fund may also use Ucits III flexibility to invest in derivative instruments for hedging and efficient portfolio management as well as to enhance its investment returns, subject to the restrictions set out in the Franklin Templeton Investment Funds prospectus. It may invest up to 10 per cent of assets in other funds, up to 100 per cent in low-rated and non-investment grade debt securities, and up to 10 per cent in securities in default. Although portfolio allocations may vary according to the managers' view of the market opportunities, the majority of the portfolio will normally be invested in dollar-denominated securities.

The co-managers of the fund are senior vice-president Eric Takaha, chief investment officer Chris Molumphy and vice-president Kent Burns, all of whom have extensive experience with the Franklin Templeton fixed-income group and are based in San Mateo, California.

The Franklin Natural Resources Fund seeks to provide investors with capital appreciation and current income by investing in equity and debt securities, primarily convertible bonds, in established and emerging markets in the global natural resources sector. The fund aims to invest at least 80 per cent of its net assets in companies directly or indirectly related to the natural resources sector.

'We believe our new funds are an attractive extension to our existing SICAV range,' says Jamie Hammond, senior director for global advisor services. 'These strategies are not new to Franklin Templeton Investments, which has considerable experience in managing both natural resources and innovative fixed-income strategies for US investors, and we are looking forward to offering them to UK investors once FSA approval has been received.

'The Franklin Templeton fixed-income group, which has accumulated more than 50 years of experience pursuing diversified sources of alpha across securities, sector and global markets is offering two new strategies that may use the powers allowed under Ucits III. Franklin Templeton has considerable fixed-income capability, and these new fund launches enable us to leverage these resources to further expand the choices available to UK investors.'