Templeton Global Balanced Fund

Transcription

1 Franklin Templeton Investment Funds Templeton Global Balanced Fund Balanced Fund Profile Fund Details Inception Date 1 June 1994 Investment Style Benchmark(s) Balanced Blended 65% MSCI All Country World Index + 35% JP Morgan Global Government Bond Index FUND OBJECTIVE Templeton Global Balanced Fund (the Fund ) seeks capital appreciation and current income, consistent with prudent investment management, by investing principally in equity and corporate debt securities and government securities issued by entities throughout the world. The majority of the Fund s portfolio will normally be invested in equity securities. The Fund will seek income by investing in fixed or floating rate debt securities (including up to 5% of the Fund s net assets in non-investment grade securities) and debt obligations issued by government and government-related issuers or corporate entities worldwide. At no time will the Fund invest more than 40% of its total net assets in fixed income securities. Currently, the Fund invests predominantly in global government bonds for its fixed income portfolio. Peter Wilmshurst Executive Vice President, Portfolio Manager Our value investment discipline finds us sorting through the rubble of consensus pessimism in search of hidden gems. We believe astute investors will be rewarded over the long term for investing in areas that are currently distressed. WHY CONSIDER THIS FUND Capitalizing on global investment opportunities. The portfolio managers believe that greater value can be found by looking at both fixed income and equity securities globally rather than by limiting oneself to a single market or currency. The Fund invests in countries in both developed and emerging markets. Diversified portfolio of equities and fixed income. Investing in both stocks and bonds can help diversify market risk. The addition of fixed income helps to reduce the overall volatility of an otherwise equity-only portfolio. The Fund offers global opportunities across country, currency, sectors and market capitalization. Two sources of expertise in one portfolio. The equity portion of the portfolio is managed by. The equity portfolio manager seeks to identify companies that, in their view, are trading at the greatest discount to future intrinsic value. The fixed income portion is managed by Templeton Global Macro with experience overseeing a wide variety of fixed income strategies. ESG Considerations Our equity analysts employ an economic-based approach to ESG, focused on assessing the risks and opportunities for individual companies and how they impact the long-term risk and return profile of a company. For Professional Investor Use Only. Not for Distribution to Retail Investors.

2 INVESTMENT PHILOSOPHY & PROCESS The Fund is managed by two investment management groups with a long history of investing in the global equity and fixed income markets: Founded in 1940, Templeton s investment philosophy is built upon a disciplined, yet flexible, long-term value-oriented approach. It is based on four tenets that they believe are critical to successful long-term investing: global, value, patience, and bottom-up stock selection. Templeton has always believed that when searching for the best investment opportunities, bargains are borderless. They seek to identify the underlying worth of a business and to determine what that company s assets can generate in earnings and cash flow. As long-term, valuation-driven investors, they focus on normalized earnings to seek out compelling opportunities in all sectors and markets around the globe. Stock markets are often short sighted and affected by sentiment, Templeton s long-term focus allows them to look past short-term market noise and identify the fundamental value of a stock. Their commitment to original research drives the process to uncover opportunities wherever they may exist. Although the Fund is co-managed by both the Templeton Global Equity Group and Templeton Global Macro, each investment group adheres strictly to its own investment process. The investment process for the equity team consists of five steps: Step 1: Identify Potential Bargains. Quantitative screening, qualitative assessment and the deep experience of the Templeton analysts narrows the investable universe down to a group of securities that merits closer analysis. In addition, our analysts identify material ESG issues aided by multiple industry resources, including ESG research and data providers. Our best screen is our experience: Templeton portfolio managers and analysts are industry experts with a comprehensive knowledge of every aspect of their industries. Step 2: In-Depth Fundamental Analysis. Analysts are aligned by global industry, with secondary country coverage. This multi-faceted global approach to industry, sector and country research coverage offers a comprehensive perspective. The analysts conduct rigorous fundamental security analysis on all potential investment ideas to determine if the stock is trading at a substantial discount to what their research indicates the company is worth over a Templeton Global Macro Templeton Global Macro seeks to provide superior riskadjusted 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. Templeton Global Macro s approach to investing in the global bond market considers the total return of each security, taking into account interest rate, currency, credit and sovereign risk. Team members provide value-added research to find profitable investment opportunities for the Fund by investigating macroeconomic conditions, geopolitical risks, monetary policies, interest rates and currencies in all investable countries around the world. normalized five-year investment horizon. Templeton analysts assess whether ESG factors could impact the long-term risk and return profile of a company. This focus on the long term ensures that their research is not biased by short-term cyclical considerations. Step 3: Research Team Evaluation. Templeton s collaborative culture ensures that each stock recommendation is thoroughly debated and critiqued. Research meetings, during which analysts present overviews of their stock recommendations to the team, are conducted twice-weekly, and a Devil s Advocate is appointed to take the lead in the questioning of each potential investment idea. The ESG Devil s Advocate challenges the analysts on how they have integrated ESG into their analysis. This ensures that each investment idea is subjected to the intense scrutiny and rigorous examination of the entire team. For Professional Investor Use Only. Not for Distribution to Retail Investors. 2

3 Step 4: Bottom-Up Portfolio Construction. All Templeton portfolios are built from the bottom up, on a stock-by-stock basis, with a consistent focus on long-term valuations. As they are concerned first and foremost with the pursuit of compelling valuations, they do not construct portfolios to match the characteristics of any specific benchmark. As a result, the country and industry allocations are a result of the bottom-up stock selection process. When selecting stocks, the portfolio manager has discretion but must do so within a disciplined, structured framework of controls designed to ensure consistency and diversification for all clients. Step 5: Portfolio Monitoring and Risk Management. Client portfolios are actively managed to ensure that they continually reflect Templeton s best thinking. This is accomplished through a team commitment to ongoing fundamental research and risk management. Analysts conduct ongoing ESG monitoring, tracking whether ESG trends are improving or deteriorating as per their thesis as well. Several internal groups work closely with our portfolio managers to monitor portfolios and manage risk. Their strong input and support is critical to the portfolio management process. Templeton Global Macro Our international bond strategies offer a unique combination of flexibility and expertise with the aim of maximizing total return. The core of the investment process is Templeton Global Macro s global investment platform. Importantly, our London, New York, Singapore and San Mateo offices, as well as local investment management offices in Canada, Mexico, Brazil, United Arab Emirates, India, Malaysia, China, Korea and Australia, function as one fully integrated investment team. Having such broad expertise creates opportunities to actively manage and take advantage of unique dynamics in individual markets. techniques. The process incorporates regular feedback between team members, between traders and risk specialists and between performance analysts. The fixed income portion of the Fund capitalizes on international investment opportunities in both sovereign and local currency markets. The portfolio managers and the research team seek investment opportunities throughout the world by identifying market disequilibria, or inefficiencies, in the fixed income and currency markets. Fund managers apply an active management, benchmark-agnostic style, pursuing absolute returns over a one- to three-year time horizon, while also taking into consideration the full market cycle, which is usually a period of three-to-five years. With a long-term, fundamentally driven investment focus, portfolio manager Dr. Michael Hasenstab, and his international bond team perform global macroeconomic analyses aiming to identify economic imbalances leading to value in developed and emerging market countries via: Currency analysis Interest rate (duration) analysis Sovereign credit analysis The investment process combines qualitative analysis of macroeconomic factors with sophisticated quantitative tools. Managers focus the investment process on fundamental research to identify long-term opportunities and use shortterm market inefficiencies to build positions in such investments. These views are applied to currency, duration and sovereign credit exposure unconstrained by the benchmark allowing for portfolio holdings to be easily shifted to reflect anticipated changes. The team employs fundamental, country-by-country macroeconomic research, coupled with quantitative analysis, as can be seen in the diagram below. This process combines in-depth country research, macro analytic models and on-theground insight from local market participants and policymakers with rigorous risk and portfolio construction PORTFOLIO CONSTRUCTION The Fund has a static asset allocation of 65% equities and 35% fixed income and cash. For Professional Investor Use Only. Not for Distribution to Retail Investors. 3

4 Equity Portion 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 at 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. Stocks are purchased only when the price is within this pre-set price range. 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. All holdings are regularly reviewed to ensure that analyst recommendations are up-to-date and accurately reflect any changes in company fundamentals. Fixed Income Portion To construct the portfolios, members of the fixed income portfolio management team 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 s 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 analyze the impact on currency values and interest rates. 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 put subscriptions 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 The Fund has specific investment guidelines and requirements that are set forth by the board of directors of Franklin Templeton Investment Funds and reviewed on a quarterly basis to ensure that the risk management process is adhered to: Security Selection Constraints Portfolio managers have discretion in selecting securities for the portfolio, but they must be within the approved list and general guidelines established by each respective group. Asset Classes The Fund invests in equity or equity-linked securities, including debt or preferred stock convertible or exchangeable into equity securities, selected primarily on the basis of their capital growth potential. The Fund is also invested in fixed income securities worldwide for the purpose of generating income. However, at no time will the portfolio managers invest more than 40% of the Fund s total net assets into fixed income securities. Country/Regional and Sector Limits There are no limits. Min/Max Security Positions Individual security positions typically do not exceed 5% of the Fund s total net assets. 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 equity portion, the fund may, from time to time, seek to hedge against currency risks. In the fixed income portion, futures and other derivatives may be used to hedge exchange rate risk stemming from positions in currencies where Templeton Global Macro does not have a positive medium to long-term view. Capitalization Limits In general, there are no established minimum market-cap guidelines. However for reason of liquidity, the analysts typically research companies with more than US$150 million in free float. Risk management is integrated into every aspect of the Fund s investment process. We primarily focus on three types of risk: Security-specific risk is addressed primarily through the quality of Franklin Templeton Investments research. A disciplined sell methodology also helps minimize stockspecific risk. Portfolio risk is addressed by creating fund portfolios that are well-diversified and benefit from Franklin Templeton Investments best thinking. Weekly peer reviews allow portfolio managers to review their positioning relative to For Professional Investor Use Only. Not for Distribution to Retail Investors. 4

5 their peers and internal guidelines, and to ensure that each portfolio continually reflects Franklin Templeton s best investment practices. Operational risk is minimized by the due diligence of the portfolio managers and the separation of all major investments and their related functions. A comprehensive system of checks and balances involving distinct and independent groups ensures that all investment guidelines and restrictions are strictly adhered to. Additionally, market, political and economic risks are taken into account and addressed primarily at the stock level. Analysts take all political, economic and currency factors into consideration when making financial forecasts and recommendations. PORTFOLIO MANAGEMENT TEAM The Fund is co-managed by and Templeton Global Macro. The consists of 39 portfolio managers and research analysts located in offices worldwide, organized along global industry lines. Franklin Templeton has over 170 investment professionals dedicated to managing a wide variety of fixed income strategies from corporate credit, senior secured bank loans, asset-backed securities and treasuries to global sovereign credit.* Peter Wilmshurst, CFA, is the equity portfolio manager and Michael Hasenstab, Ph.D., is the fixed income portfolio manager. These professionals are supported by other portfolio managers: Sonal Desai, Ph.D., Alan Chua, CFA, and Tian Qiu, CFA. Peter Wilmshurst, CFA Executive Vice President Portfolio Manager/Research Analyst Franklin Templeton Investments Australia Limited Peter Wilmshurst, CFA, is an executive vice president in the with research responsibility for banks in Europe and Asian telecommunications companies. He is also the coordinator for the financial sector team and the portfolio manager of a number of Templeton's global portfolios. Prior to joining Franklin Templeton in 1998, Mr. Wilmshurst was an equity portfolio manager and analyst with Norwich Investment Management in Australia and an actuary at MLC Life Company. He entered the financial services industry in Mr. Wilmshurst holds a bachelor of economics degree and a master of economics degree from Macquarie University (Australia). He qualified as a Fellow of the Institute of the Actuaries of Australia and as a Fellow of the Financial Services Institute of Australia. Mr. Wilmshurst is a Chartered Financial Analyst (CFA) charterholder and a past president of the CFA Society of Melbourne. Michael Hasenstab, Ph.D. Executive Vice President, Portfolio Manager CIO, Templeton Global Macro Franklin Advisers, Inc. Dr. Michael Hasenstab, Ph.D., is executive vice president and chief investment officer for Templeton Global Macro, which conducts in-depth global macroeconomic analysis covering thematic topics, regional and country analysis, and interest rate, currency and sovereign credit market outlooks. Templeton Global Macro offers global, unconstrained investment strategies through a variety of investment vehicles ranging from retail mutual funds to unregistered, privately offered hedge funds. Dr. Hasenstab is a portfolio manager for a number of funds, including Templeton Global Bond Fund and Templeton Global Total Return Fund. Dr. Hasenstab is economic advisor to the CEO of Franklin Resources, Inc., providing his perspective and insight through the lens of Templeton Global Macro. In addition, he is a member of Franklin Resources' executive committee, a small group of the company s top leaders responsible for shaping the company's overall strategy. Dr. Hasenstab has received numerous industry awards and accolades throughout his investment career. Over the last decade, the funds that he and his team manage have collectively received more than 400 awards from various rating agencies globally, including Lipper and Morningstar. In addition, various publications have recognized Dr. Hasenstab's investment expertise including, most recently, his being named one of Forbes' Money Masters of Investment Week named him Global Bond Manager of the Year in 2008, 2010 and 2011 and recognized him as one of the most influential fund managers in Morningstar awarded him Fixed Income Manager of the Year in Canada in 2013 and Fund Manager of the Year in the U.S. in In 2011 and 2012, he was highlighted as one of the most influential young people in business in Fortune's 40 under 40. Dr. Hasenstab initially joined Franklin Templeton Investments in July After a leave of absence to obtain his doctor of philosophy (Ph.D.) degree, he rejoined the company in April He has worked and traveled extensively abroad, with a special focus on Asia. Dr. Hasenstab holds a Ph.D. in economics from the Asia Pacific School of Economics and Management at Australian National University, a master's degree in economics of development from the Australian National University, and a B.A. in international relations/political economy from Carleton College in the United States. For Professional Investor Use Only. Not for Distribution to Retail Investors. 5

6 Sonal Desai, Ph.D. Senior Vice President, Portfolio Manager Director of Research Templeton Global Macro Franklin Advisers, Inc. Sonal Desai, Ph.D., is a senior vice president and director of research for Templeton Global Macro. Dr. Desai is a portfolio manager for a number of funds, including Templeton Global Bond Fund and Templeton Global Total Return Fund. Templeton Global Macro offers global, unconstrained investment strategies through a variety of investment vehicles ranging from retail mutual funds to unregistered, privately offered hedge funds. Dr. Desai is responsible for shaping the team's research agenda of in-depth global macroeconomic analysis covering thematic topics, regional and country analysis, and interest rate, currency and sovereign credit market outlooks. This includes facilitating broader research efforts leveraging Franklin Templeton's local fixed income investment professionals across global markets. Dr. Desai joined Franklin Templeton Investments in 2009 from Thames River Capital in London. She started her career in 1994 as an assistant professor of economics at the University of Pittsburgh, and then worked for over six years at the International Monetary Fund in Washington, DC. Following this, she joined the private financial sector and worked for about five years as director and senior economist for Dresdner Kleinwort Wasserstein in London. Dr. Desai holds a Ph.D. in economics from Northwestern University and a B.A. in economics from Delhi University. She is part of the Templeton Global Bond Fund portfolio management team named Morningstar's Fixed Income Manager of the Year in Canada in Alan Chua, CFA Executive Vice President Portfolio Manager/Research Analyst Templeton Asset Management Limited Singapore Alan Chua is an executive vice president and research analyst for the, as well as a portfolio manager for a number of institutional and retail clients based in and outside Singapore. He has global research responsibilities for the machinery industry, as well as country research coverage of Japan. Prior to joining Franklin Templeton in 2000, Mr. Chua was an associate director with UBS Asset Management and a senior corporate relationship officer for Deutsche Bank. He entered the financial services industry in Mr. Chua holds a B.Sc. in economics from the University of Oregon and an M.B.A. from the London Business School. He is a Chartered Financial Analyst (CFA) charterholder. Tian Qiu, CFA, CPA Senior Vice President Portfolio Manager, Research Analyst Templeton Investment Counsel, LLC Tian Qiu is a senior vice president, portfolio manager and research analyst in the with global research responsibility for the transportation, aerospace and defense sectors. She began her investment career with Franklin Templeton in Prior to her current position, she was a junior research analyst and a research system analyst working closely with portfolio managers and analysts in developing financial models, database queries, stock screens, backtesting, and other quantitative analysis. Ms. Qiu holds a B.S. in accounting from Florida Atlantic University and an M.S. in computer information systems from the University of Miami. She is a Chartered Financial Analyst (CFA) charterholder and a Certified Public Accountant (CPA). For Professional Investor Use Only. Not for Distribution to Retail Investors. 6

7 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, equity-related and debt securities around the world. Such securities have historically been subject to significant price movements that may occur suddenly due to equity and bond market or company-specific factors. As a result, the performance of the Fund can fluctuate considerably over time. The Fund may distribute income gross of expenses. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital. Other significant risks include: credit risk, currency risk, emerging markets risk, liquidity risk, derivatives risk. 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. *As of December 31, Effective 31 July 2017, Templeton Global Balanced Fund changed its benchmark to the Blended 65% MSCI All Country World + 35% JP Morgan Global Government Bond Index. 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.