William Ledward. Senior Vice President Portfolio Manager 27 Years in Industry

Transcription

1 FRANKLIN TEMPLETON FIXED INCOME GROUP 63 Portfolio Managers 70 Research Analysts Group AUM: 280B / $364.7B MARKETS Emerging SECTORS Global Sovereign Corporate Credit William Ledward Senior Vice President Portfolio Manager 27 Years in Industry

2 FRANKLIN TEMPLETON FIXED INCOME GROUP 2 Table of Contents Sovereign G7 Currency Debt Sovereign Local Currency Debt Corporate G7 Currency Debt

3 FRANKLIN TEMPLETON FIXED INCOME GROUP 3 Sovereign G7 Currency Debt Key characteristics G7 currency EMD does involve significant USD exposure which offers some levels of stability in what can be quite a volatile investment environment The hard currency universe is made up of over 70 countries of which roughly 50 are in the index meaning that 20 are not and often these countries offer the best value Current valuation levels are high given yields have dropped to historical low levels however there is a potential for the narrowing of credit spreads G7 currency EMD issuance has struggled to grow at any great rate over the last 10 years

4 FRANKLIN TEMPLETON FIXED INCOME GROUP 4 Sovereign G7 Currency Debt JP Morgan EMBIG Diversified Performance 2012 YTD* 3 Years 5 Years 10 Years EMBIG Diversified Performance (USD%) EMBIG Diversified Volatility (USD%) Reward to Risk Correlation with US Treasuries As of 31 December 2012 Source: JP Morgan Past performance does not guarantee future results and results may differ over future time periods.

5 FRANKLIN TEMPLETON FIXED INCOME GROUP 5 Sovereign G7 Currency Debt Yield and Spread over Treasuries on the JP Morgan EMBIG Diversified EMBIG Div Spread EMBIG div Yield Source: JP Morgan. As of 31 December 2012.

6 FRANKLIN TEMPLETON FIXED INCOME GROUP 6 Sovereign Local Currency Debt Key characteristics Local currency EMD bond issuance has been increasing rapidly over the last decade It offers investors exposure to local yields as well as emerging market currencies giving two potential sources of returns Yields tend to be higher with local currency EMD Local currency EMD can incur currency risk given the extent and frequency in currency values There are barriers to entry in several key markets for foreign investors e.g. China and India

7 FRANKLIN TEMPLETON FIXED INCOME GROUP 7 Sovereign Local Currency Debt JP Morgan GBI-EM Global Diversified Performance GBI-EM Global Diversified Performance (Local%) GBI-EM Global Diversified Performance (USD%) GBI-EM Global Diversified Volatility (USD%) 2012 YTD* 3 Years 5 Years 10 Years N/A Reward to Risk Correlation with US Treasuries * As of 31 December 2012 Source: JP Morgan. Past performance does not guarantee future results and results may differ over future time periods.

8 FRANKLIN TEMPLETON FIXED INCOME GROUP 8 Sovereign Local Currency Debt Yield on the JP Morgan GBI-EM Global Diversified GBI-EM Global YTM Source: JP Morgan. As of 31 December Past performance does not guarantee future results and results may differ over future time periods.

9 FRANKLIN TEMPLETON FIXED INCOME GROUP 9 Corporate G7 Currency Debt Key characteristics Corporate EMD issuance is increasing significantly Corporate EMD offers higher yields compared to similarly rated developed market corporates Strong historic returns characteristics Market liquidity can be an obstacle Volatility can be high within the asset class

10 FRANKLIN TEMPLETON FIXED INCOME GROUP 10 Corporate G7 Currency Debt Corporate EMD Performance 2012 YTD* 3 Years 5 Years 10 Years EMCB+ Performance (USD%) EMCB+ Volatility (USD%) Reward to Risk Correlation with U.S. Treasuries * As of 31 December 2012 Source: Merrill Lynch Past performance does not guarantee future results and results may differ over future time periods.

11 FRANKLIN TEMPLETON FIXED INCOME GROUP 11 Corporate G7 Currency Debt Yield and Spread on the BAML EMCB Yield to Worst (s.a.) Spread to worst Source: Bank of America Merrill Lynch. As of 31 December 2012 Past performance does not guarantee future results and results may differ over future time periods.

12 FRANKLIN TEMPLETON FIXED INCOME GROUP 12 Comparison across the Asset Class Performance 3 Years 5 Years 10 Years EMBIG Diversified (USD%) GBI-EM Global Diversified (USD%) BAML EMCB+ (USD%) Volatility 3 Years 5 Years 10 Years EMBIG Diversified (USD%) GBI-EM Global Diversified (USD%) BAML EMCB+ (USD%) Reward to Risk 3 Years 5 Years 10 Years EMBIG Diversified (USD%) GBI-EM Global Diversified (USD%) BAML EMCB+ (USD%) Correlation with Treasuries 3 Years 5 Years 10 Years EMBIG Diversified (USD%) GBI-EM Global Diversified (USD%) BAML EMCB+ (USD%) Source: Franklin Templeton Investments. As of 31 December 2012 Past performance does not guarantee future results and results may differ over future time periods.

13 FRANKLIN TEMPLETON FIXED INCOME GROUP 13 Investing in the Asset Class We believe that a diversified portfolio consisting of issues denominated in hard and local currencies has the potential to generate attractive returns at lower levels of absolute risk than standard emerging market debt benchmarks. Allocation for the Franklin Templeton Emerging Markets Debt Opportunities Strategy Currency allocation 10% 24% Local G7 Cash 66% 1. Source: Franklin Templeton Investments. As of 31 December 2012 Past performance does not guarantee future results and results may differ over future time periods.

14 FRANKLIN TEMPLETON FIXED INCOME GROUP 14 Biography WILLIAM LEDWARD Senior Vice President, Portfolio Manager Franklin Templeton Fixed Income Group Franklin Templeton Investment Management Limited London, England, United Kingdom William Ledward, based in London, is in charge of the EMD Opportunities strategy. Prior to joining the firm in 1997, he was with BNP, Nomura, Merrill Lynch, and Phillips & Drew, where he held a variety of economic research positions over a 15-year period. Mr. Ledward earned an M.A. and a D.Phil. from Oxford University. He is a director of the Emerging Market Creditors Association.

15 FRANKLIN TEMPLETON FIXED INCOME GROUP 15 Disclaimer For professional investors only, retail investors must not rely on the information in this document. Copyright Franklin Templeton Investments. All rights reserved. Franklin Templeton Investments and its management groups have exercised professional care and diligence in the collection and processing of the information in this report. However, the data used in the preparation of this document were provided by third-party sources and Franklin Templeton Investments has not independently verified, validated or audited such data. This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or an invitation to apply for shares of any Franklin Templeton Investments fund. Nothing in this document should be construed as investment advice. Data from third party sources may have been used in its preparation and Franklin Templeton has not independently verified, validated or audited such data. Opinions expressed are the author s at publication date and they are subject to change without prior notice. Franklin Templeton Investments shall not be liable to any user of this document or to any other person or entity for the inaccuracy of information or any errors or omissions in its contents, regardless of the cause of such inaccuracy, error or omission. Past financial performance is no guarantee of future results. The value of shares in the fund and income received from it can go down as well as up, and investors may not get back the full amount invested. Emerging markets can be more risky than developed markets. To the extent permitted by law, Franklin Templeton Investments, its members, employees and agents accept no liability and disclaim all responsibility for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it. Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: The Adelphi, 1-11 John Adam Street, London WC2N 6HT. FTIML is authorised and regulated by the Financial Services Authority. Indices are unmanaged and one cannot invest directly in an index.