Franklin Global Fundamental Strategies Fund

Transcription

1 Franklin Templeton Investment Funds Franklin Global Fundamental Strategies Fund Asset Allocation Fund Profile Fund Details Inception Date 25 October 2007 Investment Style Benchmark(s) Asset Allocation 2/3 MSCI World Index 1/3 JP Morgan Global Government Bond Index FUND OBJECTIVE Franklin Global Fundamental Strategies Fund (the Fund ) seeks capital appreciation through a diversified, value- oriented approach, with a secondary objective of seeking income. The Fund generally invests in equity securities of companies of any market capitalisation located anywhere in the world, including Emerging Markets, as well as fixed and floating rate debt securities and debt obligations issued by government, government- related and/or corporate entities worldwide. The Fund makes an allocation of its assets between three different investment strategies followed independently by the Franklin, Templeton and Franklin Mutual Series management groups, with the aim to maintain an equal exposure to two global equity strategies and one global fixed income strategy, subject to appropriate monitoring and rebalancing. WHY CONSIDER THIS FUND Access to experienced portfolio management teams. The underlying strategies are managed by the Franklin, Templeton and Franklin Mutual Series teams, respectively. Each one of these organizations has a long history of pursuing strong risk-adjusted performance across a variety of market environments on behalf of clients for more than 70 years. Global investment strategy provides greater diversification. Each of the underlying portfolio management teams has a unique, time-tested approach to global investing. This results in a portfolio that not only provides diversification across equity, fixed income and currency investments but offers the possibility for very limited common holdings between the underlying strategies. This creates a portfolio strategy that seeks out true diversification, not duplication. A simpler approach to asset approach. The fund offers investors the convenience of accessing the three underlying strategy offerings from Franklin Templeton Investments in a single product. Additionally, the fund s allocation to the underlying strategies is monitored and automatically rebalanced to adapt to market movements. This rebalancing feature helps maintain consistent exposure to three distinct investment strategies in any market environment. For Professional Investor Use Only. Not for Distribution to Retail Investors.

2 INVESTMENT PHILOSOPHY & PROCESS Through an allocation to three independent underlying management teams Franklin Templeton Fixed Income Group, Templeton and Franklin Mutual Series the combined fund provides diversification and an automatic rebalancing feature to help maintain equal exposure to two global equity strategies and one global fixed income strategy. The underlying strategies utilized by the fund bring the unique approach of each management team to provide a portfolio diversified across global equities and fixed income. Each underlying strategy is described in greater detail below: Templeton: The strategy invests primarily in the equity securities of companies located anywhere in the world, including emerging markets, utilizing a bottom-up, valueoriented, long-term approach. Templeton s investment philosophy is based on three tenets that they believe are critical to successful long-term investing: value, patience and bottom-up stock selection. They focus efforts on identifying stocks trading at a discount to what their research indicates a company is worth. The depth of their research provides them the conviction to wait for the market to reflect the fair value of a stock once it s been added to the portfolio. The team s commitment to comprehensive fundamental analysis and original research drives their process to uncover opportunities wherever they may exist. The above chart is for illustration and discussion purposes only. 1. Historical turnover is based on Templeton s experience as a Firm, over a five-year period as of most recent quarter end. The turnover is a byproduct of Templeton s long-term approach to managing portfolios, but various factors, such as a portfolio s specific investment guidelines and market or economic conditions may cause actual portfolio turnover to vary. For more information regarding an individual strategy s or fund s historical turnover ratio, please contact your Franklin Templeton representative. Franklin Mutual Series: The strategy follows a unique value style, seeking securities that are trading at a substantial discount to their intrinsic value. The Franklin Mutual Series investment team takes a proactive interest in the companies in which it invests; thinking and acting as business owners. Through its proprietary bottom-up research, the team seeks to identify securities which are significantly undervalued in the marketplace and have the potential to appreciate in value, regardless of market movements. The strategy is opportunistic, flexible and benchmarkagnostic. The portfolio team adheres to a bottom-up, valueoriented investment process. The team invests primarily in undervalued securities, merger arbitrage or restructuring opportunities, and the distressed securities of companies going through bankruptcy or reorganization. For Professional Investor Use Only. Not for Distribution to Retail Investors. 2

3 Franklin Templeton Fixed Income Group: The Franklin Templeton Fixed Income Group seeks to provide superior risk-adjusted returns by anticipating changes in the factors that determine variations in bond prices and currency values. The group adopts an active management approach, based on top-down, in-depth research of the economy and sectors, combined with bottom-up securities valuations and portfolio construction. The strategy invests predominately in bonds issued by governments and government agencies located around the world. The strategy focuses on investment grade bonds but can invest up to 25% in bonds rated below investment grade. The fund may also enter into various currency-related transactions as an additional means by which to enhance returns in any environment. The above chart is for illustrative and discussion purposes only. PORTFOLIO CONSTRUCTION The fund s managers seek to provide consistent exposure to the underlying strategies through regular rebalancing of portfolio allocations. This provides constant access to the independent expertise of the underlying management groups as they construct their respective portfolios. Templeton Templeton does not use model portfolios. All portfolios are built from the approved stock lists that comprise Templeton s Global Research Database. Portfolio managers select stocks from the Bargain List, which is comprised of companies our analysts believe are most undervalued relative to their longer-term business prospects, and the more attractively valued end of the Core List (stocks that are still attractively valued but above Bargain List cut-offs). Each stock has an established valuation or price target that is set by the analyst responsible for recommending the security, and stocks are purchased only when the price is within this pre-set price range. All holdings are regularly reviewed to ensure that analyst recommendations are up-to-date and accurately reflect any changes in company fundamentals. In this way, our ongoing fundamental research drives all buy and sell decisions. Sell Discipline A stock is moved to the Source of Funds List (those stocks our analysts believe are fully valued) and sold if: The security price exceeds our estimation of value, Greater value exists in another similar security, or A fundamental change occurs at a company to alter our forecasts. Franklin Mutual Series The Franklin Mutual Series team does not actively make any asset allocation decisions. Sector and country weightings are a residual of the stock selection process and there are no established weights or preclusions for any sector. The Franklin Mutual Series team often purchases significant stakes in companies and may also exert influence on management. The focus is entirely on the pursuit of the best investment ideas and portfolios are not constructed with any reference to an index. The team considers cash to be a by-product of the stock selection process. As the analysts search for attractive opportunities, they are acutely aware of potential downside For Professional Investor Use Only. Not for Distribution to Retail Investors. 3

4 risks to securities that may seem "cheap. If they cannot find attractive investments, they have always preferred to hold cash. It is an important aspect of Franklin Mutual Series philosophy, which has been paramount to its long-term success. Sell Discipline Fund managers will sell a security for the following reasons: The security approaches or reaches the analyst s estimate of intrinsic value. The price of the security rises significantly and exceeds a level that the team considers appropriate given their evaluation of its potential risk and return characteristics. The economic fundamentals of the business have changed, causing a reduction in the estimate of the intrinsic value of the company, thereby changing the investment s reward-risk parameters. Franklin Templeton Fixed Income Group To construct the portfolios, team members precisely identify desired currency, duration and credit exposures to reflect the most attractive risk exposures relative to current valuations. These exposures are then isolated and compiled to ensure that only the most attractive opportunities are held. These positions are discussed among Franklin Templeton Investments extended fixed income team to validate positioning. During the implementation phase, traders and other on-theground professionals advise on market flows, trade structuring and local execution. The team takes into consideration the level of risk aversion in the global markets: on a security-by-security basis, the portfolio team maintains a keen awareness of risk, building a portfolio within a specific risk budget. The risk budget will shift, based on relative attractiveness of each security during global economic and credit cycles. The team uses proprietary and state-of-the art, third-party tools to measure risk, including scenario analysis where analysts model potential crises, such as geopolitical risks or oil price shocks, to analyse the impact on currency values and interest rates. The Fund s ability to generate excess returns from currencies, interest rates and credit in a wide variety of economies with differing business cycles makes it an excellent diversifier within a broader portfolio of different asset classes. The fundamentals-driven analysis used by the strategy has enabled the Fund to deliver outstanding returns in a variety of global environments while maintaining an investment-grade credit rating throughout its history. This approach has been especially beneficial in recent periods of financial market stress as the Fund has avoided the severe downturns suffered by some securities. Sell Discipline Positions are sold for one or more of the following reasons: Another name or investment opportunity has substantially greater value; Positions reach target sell levels set by analysts; or The fundamentals of a given issue change, warranting a revaluation of the expected risk return profile. Redemptions from and inflows into the Fund are treated similarly. In the short term, the assets are bought or sold to meet redemptions or subscriptions are put to work based on current market valuations and long-term targets. Fund managers will then continue to optimize the portfolio to achieve target weightings. They generally do not simply allocate new cash or redemptions across all holdings unless this strategy fits with their view on valuations and long-term targets. RISK MANAGEMENT As stewards of our clients capital, portfolio managers conduct deep research to find the best investment opportunities for their respective strategies. Their research is strengthened by a formalized collaboration with Franklin Templeton s Investment Risk Management Group a team of specialized risk professionals aligned by asset class and strategy. To help ensure appropriate objectivity, the Investment Risk Management Group does not have direct reporting lines to portfolio management but instead reports directly to the Chairman and Chief Executive Officer of Franklin Templeton. The Fund s specific investment guidelines and requirements that are set forth by the board of directors of Franklin Templeton Investment Funds (FTIF) and reviewed on a quarterly basis to ensure that the risk management process is adhered to: Asset Classes The Fund primarily invests in equity and equity-related securities of companies of any market capitalisation located anywhere in the world, including Emerging Markets as well as debt and debt-related securities issued by government, government-related and/or corporate entities worldwide as well as debt obligations issued by supranational entities organised or supported by several national governments. The Fund may seek exposure to commodities through the use of cash-settled structured products and exchange-traded notes. The Fund may invest in securities of companies involved in mergers, consolidations, liquidations and reorganisations or as to which there exist tender or exchange offers, and may participate in such transactions. It may also invest in lowrated, non- investment grade and defaulted debt securities of various issuers, in fixed or floating rate securities, either directly or through regulated investment funds (subject to the limits stated in the prospectus). For Professional Investor Use Only. Not for Distribution to Retail Investors. 4

5 Country/Regional and Sector Limits There are no limits. Cash Policy Portfolio managers intend to remain close to fully invested at all times. Reported cash and cash equivalent numbers may exceed 10% in extraordinary periods. Currency Policy There are no constant hedge ratios for the Fund. However, currency is an important consideration at the security level for both equity and fixed income. In the fixed income portion, futures and other derivatives may be used for hedging purposes, as well as for expressing positive and negative currency views. Derivatives Financial derivative instruments may be dealt either in regulated markets or over- the-counter, and may include, inter alia, swaps (such as credit default swaps or total return swaps), forwards and cross forwards, futures contracts (including those on government securities), as well as options. Use of financial derivatives may result in negative exposures in a specific yield curve/duration, currency, or credit. In addition to Fund specific constraint and position limits, risk management is integrated into the investment process of the Fund s underlying strategies. PORTFOLIO MANAGEMENT TEAM Overall portfolio management for the Fund is provided by Tony Coffey and Marzena Hofrichter from the Franklin Templeton Multi-Asset Solutions (FTMAS) group. Franklin Templeton Multi-Asset Solutions consists of over 70 investment professionals located in offices worldwide, providing distinct multi-asset management expertise. Tony Coffey, CFA Senior Vice President, Portfolio Manager Franklin Templeton Multi-Asset Solutions including the Franklin Fund Allocator Series, the Franklin LifeSmart Retirement Target funds, the Franklin Corefolio Allocation Fund and Franklin Founding Funds Allocation Fund. He also manages Franklin Real Return Fund and Franklin Templeton 529 College Savings Plan's age-based and risk-based portfolios. Prior to joining Franklin Templeton Investments in 1989, Mr. Coffey was an associate for Analysis Group, Inc., an economic consulting firm specializing in the use of economic analysis for litigation. He has 25 years of financial services industry experience. Mr. Coffey holds a B.A. in applied mathematics and economics from Harvard University and an M.B.A. from the University of California at Los Angeles. He is a Chartered Financial Analyst (CFA) Charterholder and has taught a review class for CFA candidates. He is a member of the CFA Society of San Francisco and the CFA Institute. Marzena Hofrichter, CFA Vice President, Portfolio Manager/Research Analyst Franklin Templeton Multi-Asset Solutions Marzena Hofrichter, CFA, is a Portfolio Manager for Franklin Templeton Multi-Asset Solutions based in Frankfurt am Main/Germany. She is responsible for research and analysis of proprietary and third-party European equity and fixed income mutual funds and mandates for use in Europe, North America and globally-registered multi-asset strategies. Her research coverage also includes global equity mutual funds. Marzena Hofrichter joined Franklin Templeton Investments in Prior to that, she has gathered several years of investment industry experience as a fund analyst with Morningstar and as an assistant portfolio manager with Allianz Global Investors Balanced and Global Equity teams. Marzena Hofrichter earned her M.A. in finance and banking from the Warsaw School of Economics (SGH) in She is a Chartered Financial Analyst (CFA) charterholder and a member of the CFA Society Germany. Tony Coffey, CFA is a senior vice president and portfolio manager for Franklin Advisers, Inc. He manages fund of fund portfolios for Franklin Templeton Multi-Asset Solutions, For Professional Investor Use Only. Not for Distribution to Retail Investors. 5

6 WHAT ARE THE KEY RISKS? 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. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund invests mainly in equity and debt securities of companies around the world, including emerging markets. Such securities have historically been subject to significant price movements that may occur suddenly due to market or company-specific factors. As a result, the performance of the Fund can fluctuate considerably over time. Credit risk: the risk of loss arising from default that may occur if an issuer fails to make principal or interest payments when due. This risk is higher if the Fund holds low-rated, non-investment-grade securities. Derivatives risk: the risk of loss in an instrument where a small change in the value of the underlying investment may have a larger impact on the value of such instrument. Derivatives may involve additional liquidity, credit and counterparty risks. Emerging markets risk: the risk related to investing in countries that have less developed political, economic, legal and regulatory systems, and that may be impacted by political/economic instability, lack of liquidity or transparency, or safekeeping issues. Liquidity risk: the risk that arises when adverse market conditions affect the ability to sell assets when necessary. Reduced liquidity may have a negative impact on the price of the assets. Currency risk: the risk of loss arising from exchange-rate fluctuations or due to exchange control regulations. Shanghai-Hong Kong Stock Connect risk: the Fund may suffer difficulties or delays in enforcing its rights in China A-shares, including title and assurance of ownership, given that the securities regimes and legal systems of mainland China and Hong Kong markets differ significantly. For full details of all of the risks applicable to this Fund, please refer to the Risk Considerations section of the Fund in the current prospectus of Franklin Templeton Investment Funds. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. 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 invitation to apply for shares of any of the Luxembourg-domiciled SICAV Franklin Templeton Investment Funds (the Fund ). Given the rapidly changing market environment, Franklin Templeton Investments disclaims responsibility for updating this material. Subscriptions to shares of the Fund can only be made on the basis of the current prospectus of the Fund, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. An investment in the Fund entails risks which are described in the Fund's prospectus. 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. Past performance is not an indicator or a guarantee of future performance. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign currency, your performance may also be affected by currency fluctuations. In emerging markets, the risks can be greater than in developed markets. Investments in derivative instruments entail specific risks that may increase the risk profile of the fund and are more fully described in the Fund s prospectus. If the fund invests in a specific sector or geographical area, the returns may be more volatile than a more diversified fund. No shares of the Fund may be directly or indirectly offered or sold to residents of the United States of America. Shares of the Fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest. Opinions expressed are the author s at publication date and they are subject to change without prior notice. Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. A copy of the latest prospectus, the annual report and semi-annual report, if published thereafter can be found on our website: or can be obtained, free of charge, from the address below. Issued by Franklin Templeton Investments (ME) Limited, authorized and regulated by the Dubai Financial Services Authority. Dubai office: Franklin Templeton Investments, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box , Dubai, U.A.E., Tel.: Fax: For Professional Investor Use Only. Not for Distribution to Retail Investors. DE Franklin Templeton Investments. All rights reserved.