Franklin Asia Credit Fund

Transcription

1 Franklin Templeton Investment Funds Franklin Asia Credit Fund Fixed Income Fund Profile Fund Details Inception Date 17 November 2014 Investment Style Benchmark(s) Fixed Income JP Morgan Asia Credit Index FUND OBJECTIVE FTIF Franklin Asia Credit Fund (the Fund ) seeks to maximise total investment return through a combination of interest income and capital appreciation. The Fund seeks to achieve its objective by investing principally in a portfolio composed of fixed and/or floating rate debt securities issued or guaranteed by government (including government agencies and government-related bodies), financial institutions as well as corporate entities, domiciled in Asian countries which are included in the JP Morgan Asia Credit Index benchmark ( JACI benchmark ), or having significant business activities within countries included in the JACI benchmark. Marc Kremer, CFA Portfolio Manager Asia has emerged as a region exhibiting stability, growth, and ongoing fundamental improvements. We believe this backdrop is positive for taking credit exposure in the region on a diversified and active basis. WHY CONSIDER THIS FUND A growing asset class with a wide range of issuers. Asian economies have strong growth prospects, with countries in the region having demonstrated improving debt ratings and sizable reserves. The market for USD Asia bonds has grown steadily over the past several years as more issuers have sought capital market funding. We believe that this offers potential for both income and total return for investors seeking U.S. dollar fixed income exposure. A flexible mandate to pursue attractive risk-adjusted returns. The Fund includes a broad mix of corporate, quasi-sovereign and sovereign debt issuers, thereby providing diversified exposure to investment grade and high yield issuers across the Asia region. The Fund primarily invests in USD-denominated issues, but may tactically include Asian local currency exposures to enhance returns. Credit research-intensive investment process. Our analyst teams are organised by sectors globally to ensure comprehensive coverage of issuers, with a focus on company and industry fundamentals, management quality and corporate strategy. Additionally, our global sovereign research team provides country views across Asia, and local teams in China, India, Malaysia, and South Korea offer perspectives on the dynamics of each individual market. Heritage of innovation in global fixed income investing. Franklin Templeton is a recognised leader in global fixed income markets and has been investing in Asia fixed income for nearly 30 years. Our expertise investing in both Asia corporate and sovereign credits has been tested through multiple market cycles. For Professional Investor Use Only. Not for Distribution to Retail Investors.

2 INVESTMENT PHILOSOPHY & PROCESS The Fund s investment philosophy is based on the belief that active sector, country and security selection decisions based on insights gathered from multiple perspectives bottom-up fundamental analysis, top-down macroeconomic research, and local market observations have the potential to generate attractive risk-adjusted returns over a market cycle. By implementing a large number of small, low-correlated active positions, the investment team strives to reduce the risk of poor performance from any single active position. Investment Universe The Fund s investment universe includes all countries and sectors in the JP Morgan Asia Credit Index. On a tactical basis, the Fund may also invest outside the benchmark, seeking alpha from issuers that have significant business activities in Asia, as well as selected non-asian issuers. The investment universe includes corporate, quasi-sovereign and sovereign debt issuers. Investment Process The Fund utilises significant Franklin Templeton Fixed Income Group resources, ranging from top-down macroeconomic view formulation to bottom-up research and quantitative analysis as the investment team pursues diversified sources of alpha across markets in Asia. The Investment Team Draws on Insights Gathered from Multiple Perspectives Macroeconomic Views The investment process begins with the weekly Fixed Income Policy Committee (FIPC) meeting attended by senior fixed income and equity professionals from across the Franklin Templeton organisation. At these meetings, the members discuss macroeconomic conditions, market events, and relative value across sectors, markets, and currencies. Sector teams representing the major fixed income markets provide bottom-up views on events and valuations within each sector. Utilising this information, the FIPC formulates a general framework to guide fixed income portfolio positioning. For example, the FIPC provides portfolio managers with a view on the likely path of economic conditions, as well as recommendations for portfolio currency, duration, and yield curve positioning. In addition, each sector team recommends a broad sector strategy. All allocation decisions for fixed income portfolios are determined by the portfolio strategy teams. Once the FIPC has developed the broad investment themes that guide the portfolio construction process, the Asia Credit portfolio management team formulates investment strategy and develops a model portfolio reflecting desired duration and yield curve exposure, total return potential, and the appropriate diversification and risk profile. For Professional Investor Use Only. Not for Distribution to Retail Investors. 2

3 PORTFOLIO CONSTRUCTION Investment Strategy Implementation The strategy implementation process involves extensive interaction among portfolio managers, analysts, and traders. Within the framework of the top-down allocation decisions made by the portfolio management team and based on fundamentals and relative value assessments, credit research and/or global sovereign analysts make investment recommendations to the portfolio managers. Covering investment grade and high yield issues, analysts suggest specific security investments. The portfolio managers assess the sectors and securities that are recommended by the analysts, decide which of those securities might fit into the desired portfolio structure, and then work with the corporate bond traders to determine which securities are actually available and at what valuation. The quantitative research team is utilised as a resource to understand how different portfolio structures and security selection alternatives will impact tracking error and other risk metrics. Once final investment decisions are made, portfolio managers enter orders into our trading system to be executed by corporate bond traders at the best available level. Traders provide regular market feedback to portfolio managers and may suggest changes to trades based on liquidity and valuation considerations. After implementation, portfolios are regularly monitored by analysts who frequently discuss positions with portfolio managers. Changes are made if more attractive opportunities become available or if portfolio management s views on individual holdings change due to price movements or fundamental developments. Risk Management is inherent in the process, providing the portfolio strategy team with an ongoing and timely assessment of active risk in the portfolio and ensuring that the portfolio s risk/return profile is in line with the team s more qualitative views of investment opportunities from both topdown and bottom-up perspectives. Currency Decision Currency, which can be used as a hedge and/or a separate driver of alpha, is managed as a separate asset class. The Fixed Income Group Global Sovereign/Emerging Markets team actively manages a variety of global bond and currency portfolios, and is a strong resource for the Asian Credit strategy team in the implementation of portfolio currency allocations, as well as in making sovereign credit decisions. The base currency of the Fund is US dollar. RISK MANAGEMENT Although portfolio managers make the final risk management decisions for their respective strategies, they rely on the risk analysis and recommendations of two groups the Quantitative Research Group, which is dedicated to fixed income strategies, and the Investment Risk Management Group, an independent group that monitors and manages portfolio risk across all Franklin Templeton Investments strategies. Quantitative Research Group Situated with the fixed income investment teams, the Quantitative Research Group is composed of analysts who work with portfolio managers and research analysts to formulate investment strategy, identify sources of portfolio risk, and recommend risk control measures. At times they also produce alpha-generating ideas. Analysts evaluate portfolio diversification and exposures to country, currency, credit, and interest rate, as well any security-specific risk issues. Hedging techniques are also devised for the teams utilising risk offsetting transactions. The Group compiles risk reports that guide the discussions at strategy meetings and the Fixed Income Policy Committee meetings. 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 Investment Risk Management Group collaborates with the portfolio management team on three key levels: Analytics: Accurate, relevant and timely performance and investment risk analytics are integrated into the daily fabric of portfolio management. Analysts quantify sources and levels of risk and deconstruct detailed risk data in order to identify the major sources of risk in each portfolio. Oversight: Risk professionals also provide oversight on behalf of internal and external stakeholders in relation to the fund s guidelines, regulatory and industry standards. Consulting: A dedicated risk consultant is available to work with portfolio managers in the ongoing management process to review the portfolio s overall diversification focusing on alignment with the team s convictions and risk optimization based on investor expectations. Our most senior risk professionals may also provide forward-looking analysis and objective views on investment selection, portfolio construction and a variety of exposures from factors to liquidity. Firm-wide Risk Management Groups In addition to risk management and control specific to the investment process, fixed income portfolios also benefit from risk management provided by Franklin Templeton Investment teams that focus on organsational-level issues, such as For Professional Investor Use Only. Not for Distribution to Retail Investors. 3

4 regulatory and guideline compliance, best practices, and internal policies and procedures. The following risk oversight committees are important to the management of risk specific to the trading function. Global Trading Oversight Committee This committee monitors every facet of the trading function. Comprised of the firm s most senior traders and compliance officers, the committee ensures that trading policies and practices established by the firm are adequately and consistently applied. Counterparty Credit Committee The Counterparty Credit Committee seeks to guard against risk of loss in the trading process that can be caused by overexposure to any one trading partner, which is particularly important in volatile markets. This committee includes senior traders, portfolio managers, as well as compliance and investment risk management professionals. Annual Risk Assessment At the business unit level, Franklin Templeton Investments conducts an annual bottom-up risk assessment, reviewing and confirming risk information provided. Risks from each business unit are combined to identify enterprise-level risks. A symposium of mid-level managers meets each year to determine key risks to the firm, which are then validated by senior management before presentation to the Franklin Templeton Audit Committee and the Board of Directors. For Professional Investor Use Only. Not for Distribution to Retail Investors. 4

5 PORTFOLIO MANAGEMENT TEAM Marc Kremer, CFA Portfolio Manager Marc Kremer is a vice president, portfolio manager and research analyst in the. He is also a member of the firm's Fixed Income Policy Committee. Mr. Kremer is primarily responsible for managing investment grade credit strategies, including global credit, U.S. credit, and European credit. Additionally, he is a co-manager of Franklin Templeton's emerging market corporate debt strategies. His research coverage is focused on the media and entertainment industry. Mr. Kremer joined Franklin Templeton in 2003 with over 15 years of prior fixed income research experience at Schroders, HSBC Asset Management, Lehman Brothers, and Moody's Investors Service. Mr. Kremer holds a bachelor's degree in economics from Vassar College and an M.B.A. from Duke University's Fuqua School of Business. He is a Chartered Financial Analyst (CFA) charterholder and a member of the CFA Institute. He also serves on the advisory board of The Credit Roundtable, a group of institutional fixed income investors. Latika Signorelli Latika Signorelli is a - at Franklin Templeton. Mrs. Signorelli's research coverage includes high yield financials, life insurance, property/casualty insurance, tobacco, and Asian quasi-sovereigns/corporates. Additionally, she co-manages the Franklin Asia Credit Fund. Prior to joining Franklin Templeton in 2007, Mrs. Signorelli worked for JPMorgan Chase in their derivatives structuring group, focusing on interest rate, cross-currency, and credit derivatives. She also interned in the high yield research group at Deutsche Asset Management during business school. Mrs. Signorelli holds an M.B.A., with a focus on finance and accounting, from the Wharton School at the University of Pennsylvania. She holds a B.A. from Brown University with a dual concentration in economics and international relations. Robert Nelson, CFA Portfolio Manager, Robert 'Bobby' Nelson is a vice president, portfolio manager and research analyst focusing on Asian, European and Emerging Market financial issuers. He has been a portfolio manager on the Franklin Emerging Market Corporate Debt Fund since 2012, and the Asia Credit Fund since Mr. Nelson is currently on assignment in the firm's Singapore office, having previously been based in London. Prior to joining Franklin Templeton in 2007 Mr. Nelson was an investment manager at Mitsubishi UFJ Asset Management (UK) Ltd., where he managed a variety of global investment grade bond funds. Mr. Nelson holds a B.A. from Bristol University and is a Chartered Financial Analyst (CFA) charterholder and member. Benjamin Cryer, CFA Benjamin Cryer is a - in the. His research responsibilities include the global property development and building products industries, as well as select corporate credits in the Asia Pacific Region. Mr. Cryer is also a co-portfolio manager of Franklin Templeton's Asia credit fixed income strategies. Mr. Cryer originally joined Franklin Templeton in 2006 as an equity research analyst, covering the home construction and building products industries. He moved to the Franklin Templeton Fixed Income Group in Previously he worked as an institutional product manager at MFS Investment Management. Mr. Cryer graduated Phi Beta Kappa with a B.A. from Baylor University. He also earned an M.A. degree from Baylor University and an M.B.A. from UCLA's Anderson School of Management. He is a Chartered Financial Analyst (CFA) charterholder and a member of the CFA Institute. 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 fixed or floating rate debt securities of government, government-related, or corporate entities located in Asia, including securities that are rated less than investment grade. Such securities have historically been subject to price movements, generally due to interest rates or movements in the bond market in general. As a result, the performance of the Fund can fluctuate moderately 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, derivatives risk, emerging markets, liquidity 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. 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.