Templeton Global Bond Plus Composite

Transcription

1 Templeton Global Composite Unconstrained Fixed Income Product Profile Product Details Composite Assets 53,484,635, Inception Date 31/12/1993 Base Currency USD Investment Style Unconstrained Overview High alpha-seeking global strategy that uses a research-driven, value-based approach that seeks to capitalise on global interest rates, currency and sovereign credit trends. Primary focus includes government and government-related issuance with a 25% maximum limit on below-investment grade. Seek to maintain a portfolio risk profile commensurate with the volatility of the benchmark (6% to 9% standard deviation annually under normal market conditions). 1 Performance Data Average Annual Total Returns (EUR %) 2 Since Inception 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs (31/12/1993) Templeton Global Composite - GROSS Templeton Global Composite - NET JP Morgan Global Government Bond Index 40% 20% 0% -20% Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs Since Inception Templeton Global Composite - GROSS Templeton Global Composite - NET JP Morgan Global Government Bond Index Calendar Year Returns (EUR %) Templeton Global Composite - GROSS Templeton Global Composite - NET JP Morgan Global Government Bond Index There is no assurance that the strategy will achieve its investment objectives. The strategy is managed in a benchmarkunconstrained manner, so the target risk profile is provided solely to illustrate the manager s targets with respect to strategy characteristics, based on the strategy s historical experience during normal market conditions. Past performance is not an indicator or a guarantee of future performance. Thus, the characteristics do not take into account future market risks or changing economic conditions and are not a prediction or guarantee of future performance. An investor in the strategy may experience significantly different risk characteristics including greater volatility, higher tracking error and lower returns than the expected characteristics, including the potential for loss of principal amounts invested. 2. Periods of more than one year are annualised. Past performance is not an indicator or a guarantee of future performance.

2 Portfolio Manager Insight Market Review During the first quarter of 2018, the US Federal Reserve (Fed) raised the federal funds target rate at its March meeting and remained on course for two more rate hikes in Despite a decline in the 10-year US Treasury (UST) note s yield during the final week of March, the yield was still 33 basis points higher year-to-date in We continue to expect UST yields to rise as the Fed tightens policy while US inflation pressures pick up. In emerging markets, yields broadly rose across Asia ex Japan and declined across much of Latin America. Emerging-market currencies broadly appreciated against a weaker US dollar during the quarter, with a few notable exceptions. The Bank of Japan and European Central Bank continued with their quantitative easing programs during the quarter. Performance Review 3 Interest-rate strategies contributed to the strategy s absolute performance for the first quarter. Currency positions detracted from absolute results, while sovereign credit exposures had a largely neutral effect. The strategy maintained a defensive approach regarding interest rates in developed markets, while holding duration exposures in select emerging markets. Negative duration exposure to USTs contributed to absolute performance, as did select duration exposures in Latin America (Brazil). Among currencies, the strategy s net-negative positions in the Japanese yen and the euro detracted from absolute results, while currency positions in Latin America (the Mexican peso) contributed. Outlook & Strategy We anticipate a rise in UST yields and a reversal of US dollar weakness as the Fed moves toward tightening policy while US inflation pressures begin to pick up. We expect the Fed s balance sheet unwinding to put additional upward pressure on yields. Outside of the developed markets, we continue to see a subset of countries with domestically strong economies that have demonstrated their resilience to global shocks, including potential increases in trade costs. In the major developed economies, we anticipate continued monetary accommodation and low rates in Japan and the eurozone while rates rise in the US. Overall, we expect to continue to maintain low portfolio duration while aiming at a negative correlation with UST returns. Portfolio Characteristics of a Representative Account 3,4,5 Portfolio Number of Securities Including Cash 157 Yield to Maturity 7.69% Average Duration Yrs Average Credit Quality A- Average Weighted Maturity 3.18 Yrs 5. The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter rating, which may be based on bond ratings from different agencies (or internal ratings for unrated bonds, cash and equivalents), is provided to indicate the average credit rating of the portfolio s underlying investments and generally ranges from AAA (highest) to D (lowest). For unrated bonds, cash and equivalents, ratings may be assigned based on the ratings of the issuer, the ratings of the underlying holdings of a pooled investment vehicle, or other relevant factors. The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of investments by market value and rounding to the nearest rating. The risk of default increases as a bond s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio s default risk because a simple, weighted average does not measure the increasing level of risk from lower-rated bonds. The ACQ may be lower if cash and equivalents are excluded from the calculation. The ACQ is provided for informational purposes only. Derivative positions are not reflected in the ACQ. 2

3 Portfolio Diversification of a Representative Account 3 Geographic Allocation NON-US Brazil Mexico Colombia Argentina Peru 0.17 USA Indonesia India South Korea Philippines MIDDLE-EAST/AFRICA EUROPE SUPRANATIONAL ST CASH & CASH EQUIVALENTS OTHER % 0% 10% 20% 30% 40% 50% Geographic Weightings vs. JP Morgan Global Government Bond Index NON-US Brazil Mexico Colombia Argentina Peru 0.17 USA EX-JAPAN Indonesia India South Korea Philippines MIDDLE-EAST/AFRICA EUROPE NON-EMU EUROPE Ukraine SUPRANATIONAL ST CASH & CASH EQUIVALENTS OTHER % -25% 0% 25% 50% Currency Allocation 6 Currency Weightings vs. JP Morgan Global Government Bond Index 6 US-DOLLAR NON US-DOLLAR Mexican Peso Brazilian Real Colombian Peso Argentine Peso Peruvian Nuevo Sol MIDEAST/AFRICA EX-JAPAN Indian Rupee Indonesian Rupiah Philippine Peso South Korean Won Australian Dollar JAPANESE YEN EUROPE % -60% -40% % 0% 20% 40% 60% 80% % 120% 140% 160% 180% 200% US-DOLLAR NON US-DOLLAR Mexican Peso Brazilian Real Colombian Peso Argentine Peso Peruvian Nuevo Sol MIDEAST/AFRICA EX-JAPAN Indian Rupee Indonesian Rupiah Philippine Peso South Korean Won Australian Dollar JAPANESE YEN EUROPE EURO -125% % -75% -50% % % 25% 50% 75% 100% % 150% 3

4 Credit Quality Ratings 7 AAA AA 4.58 A BBB BBB- BB B 4.48 B NR Cash & Cash Equivalents % 5% 10% 15% 20% 25% 30% Investment Grade Non-Investment Grade Cash & Cash Equivalents Supplemental Performance Statistics 3 Yrs 5 Yrs 10 Yrs Standard Deviation (%) Templeton Global Composite JP Morgan Global Government Bond Index Tracking Error (%) Information Ratio Sharpe Ratio Templeton Global Composite JP Morgan Global Government Bond Index Investment Philosophy We believe that applying our bottom-up, research-driven approach focused on identifying potential sources of high current income worldwide and seeking to capitalise on global interest rates and currency trends provides the best potential for strong risk-adjusted returns. This is a high alphaseeking global strategy that may include allocations to both developed and emerging markets; however, below investment-grade exposure is typically limited to not more than 25% of total assets. Investment Process In-Depth Macroeconomic Fundamental Research and Analysis: Conduct independent analysis of countries, interest rates, and exchange rates using proprietary models and research. Research analysts specialise by geographic region and conduct frequent discussions with key local decision makers. The team s research drives country weightings in addition to target ranges for duration, currency, and cash. Long-Term Focused: Maintain a 12- to 18-month outlook. 7. Ratings shown are assigned by one or more Nationally Recognized Statistical Rating Organizations ( NRSRO ), such as Standard & Poor s, Moody s and Fitch. The ratings are an indication of an issuer s creditworthiness and typically range from AAA or Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available, the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific rating are assigned the country rating provided by an NRSRO, if available. If listed, the NR category consists of rateable securities that have not been rated by an NRSRO. The N/A category consists of nonrateable securities (e.g., equities). Cash includes equivalents, which may be rated. Derivatives are excluded from this breakdown. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 8. The NR category includes securities that are not rated and securities not covered by a ratings agency. The N/A category may encompass negative cash, net currency forwards, and negative derivative (market value). 9. Risk statistics are calculated using gross of fees composite performance. 10. Information Ratio and Tracking Error information are displayed for the product versus the JP Morgan Global Government Bond Index. 4

5 Portfolio Construction: Build diversified portfolios seeking the most attractive risk-return profile utilising yield curve and horizon analysis. Disciplined Approach: Adhere to long-term strategy through changing market environments, supported by analysis and monitoring from Franklin s internal risk management group. Multiple Research Lenses Can Lead to High-Conviction Opportunities 12,13 Global Research Lenses Macro Models/Analysis Three Potential Sources of Alpha Yield Curve Ideas Portfolio Construction and Implementation Risk Modelling VaR Analysis Correlation Analysis Scenario/Stress Testing In-Depth Country Analysis Currency Ideas Identification of High-Conviction Opportunities Management Team Potential Return vs. Expected Risk Global Allocations P O R T F O L I O Local Asset Management Perspective Review Sovereign Credit Ideas Review Trading Trade Structuring Market Flows Local Execution/Settlement Liquidity Analysis Review/ Performance Attribution 12. The above chart is for illustrative and discussion purposes only. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. 13. The Local Asset Management Group is comprised of investment professionals located in affiliates of and joint venture partners with Franklin Templeton Investments. Investment Team Templeton Global Management Team Years with Firm Years Experience Michael Hasenstab, Ph. D., Executive VP & Chief Investment Officer Sonal Desai, Ph. D., Senior VP, Portfolio Manager, Director of 8 24 Research Christine Zhu, VP, Director of Portfolio Construction and Quantitative Analysis Additional Resources Global Sovereign/EMD Local Asset Management 5

6 Important Legal Information Franklin claims compliance with the Global Investment Performance Standards (GIPS ). Franklin (the firm ) encompasses the equity, fixed income and balanced accounts managed by Franklin Advisers, Inc., and related Franklin affiliates, including, effective 1 January 2007, the equity accounts managed by the institutional investment teams of Franklin Templeton Institutional, LLC under the former firm name of Fiduciary Global Advisors. The combined equity assets of Franklin and Fiduciary Global Advisors form the Franklin Equity Group (formerly Franklin Global Advisers prior to 30 June 2010) unit of Franklin. Effective 1 January 2006, the fixed income assets managed from that date forward by Franklin Templeton Institutional, LLC ( FTI ) or its related affiliates (managed previously by Fiduciary Trust Company International - Institutional Division or FTCI s Institutional Division ) that went through the institutional portfolio review process were combined with the fixed income assets of Franklin to form the Franklin Templeton Fixed Income unit of Franklin. The primary reason for these changes to the firm definition was to consolidate equity and fixed income asset management for Franklin (as previously defined), Fiduciary Global Advisors (institutional equities) and FTCI s Institutional Division (institutional fixed income) under one firm, Franklin. The firm definition for Franklin does not include multistrategy asset allocation portfolios managed by Franklin Templeton Multi-Asset Solutions (FTMAS), which was previously known as Franklin Templeton Solutions as well as Franklin Templeton Multi-Asset Strategies and the wrap-fee and non-wrap-fee accounts managed by Franklin Separately Managed Accounts (formerly Franklin Portfolio Advisors) or Franklin Europe which integrated into the Templeton firm definition effective 1 December Templeton Global Composite consists of all portfolios managed on a fully discretionary basis with an investment objective that seeks to achieve above average total return by investing principally in a portfolio of fixed or floating rate debt securities and debt obligations issued by government or government-related entities worldwide. The strategy may also purchase debt obligations issued by supranational entities organised or supported by several national governments, such as the International Bank for Reconstruction and Development or the European Investment Bank. The strategy may invest a portion in below investment grade bonds (rated below BBB-). The strategy may also utilise financial derivative instruments dealt in either regulated or over-the-counter markets for investment purposes. These financial derivative instruments which are used on a less frequent basis 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. The strategy regularly takes tactical exposure to various foreign currencies, including through the frequent use of foreign currency forward contracts and cross forwards, and, to a lesser degree, futures contracts and currency options. Total returns are presented in euros both gross and net of investment advisory fees, are inclusive of commissions and transaction costs, and assume reinvestment of any dividends, interest income, capital gains, or other earnings. Periods greater than one year are shown as average annual total returns. Performance data is shown rounded to the nearest hundredth. The returns presented for periods prior to 1 January 2000 are not in compliance with the GIPS standards. Past performance is not an indicator or a guarantee of future performance. The JP Morgan Global Government Bond Index is a market value weighted fixed income index comprised of government bonds in developed countries. The benchmark is used for comparative purposes only and is provided to represent the investment environment existing during the time periods shown. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. To receive a complete list and description of Franklin composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS standards for any composite, contact your Franklin Templeton institutional representative listed below. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. Important data provider notices and terms available at 3. Portfolio information is based on a representative account taken from the Templeton Global Composite. The information is historical, may not reflect current or future characteristics and may vary significantly among individual separate accounts depending on a variety of factors such as portfolio size, specific investment guidelines and inception dates of the individual accounts. 4. Yield to Maturity, Average Duration and Average Weighted Maturity reflect certain derivatives held in Portfolio (or their underlying reference assets). 6. Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of derivatives, unsettled trades or other factors. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 11. Information Ratio is a way to evaluate a manager s ability to outperform a benchmark in relation to the risk that manager is assuming, with risk defined as deviation from the benchmark. This measure is calculated by dividing the portfolio s excess return (portfolio return less the benchmark return) by the tracking error (derived by taking the standard deviation of the monthly differences between the portfolio return and the benchmark return over time). For Institutional Professional Investors only not for distribution to retail clients. This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. All investments involve risks, including possible loss of principal. This material is made available by the following Franklin Templeton entities in those countries where it is allowed to carry out relevant business: Europe: Franklin Templeton Investment Management Limited (FTIML), registered office: Cannon Place 5th Floor, 78 Cannon Street, London EC4N6HL. Tel +44 (0) Authorised and regulated in the United Kingdom by the Financial Conduct Authority and authorised to conduct specific investment business in other European countries either via MiFID outward service or via any of the following outward branches in: Germany: FTIML Branch Frankfurt, Mainzer Landstr. 16, Frankfurt/Main, Germany. Tel +49 (0) 69/ , Fax +49 (0) 69/ , institutional@franklintempleton.de Netherlands: FTIML Branch Amsterdam, World Trade Center Amsterdam, H-Toren, 5e verdieping, Zuidplein 36, 1077 XV Amsterdam, Netherlands. Tel Romania: FTIML Branch Bucharest, Buzesti Street, Premium Point, 7th-8th Floor, Bucharest 1, Romania. Registered with Romania Financial Supervisory Authority under no. PJM01SFIM/400005/ , authorised and regulated in the UK by the Financial Conduct Authority. Tel , Fax , Spain: FTIML Branch Madrid, Professional of the Financial Sector under the Supervision of CNMV, José Ortega y Gasset 29, Madrid, Spain. Tel , 2018 Franklin Templeton Investments. 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7 Fax Sweden: FTIML Branch Stockholm, Blasieholmsgatan 5, SE , Stockholm, Sweden. Tel +46 (0) , nordicinfo@franklintempleton.com Switzerland: Franklin Templeton Switzerland Ltd., Stockerstrasse 38, CH-8002 Zurich, Switzerland. Tel , Fax , info@franklintempleton.ch South Africa: Franklin Templeton Investments SA (PTY) Ltd., which is an authorised Financial Services Provider. Kildare House, The Oval, 1 Oakdale Road, Newlands, 7700 Cape Town, South Africa. Tel +27 (21) , Fax +27 (11) , Dubai: Issued by Franklin Templeton Investments (ME) Limited, authorised 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 Please visit to be directed to your local Franklin Templeton website with further contact details/information Franklin Templeton Investments. All rights reserved.