Franklin Emerging Market Debt Opportunities Fund plc

Transcription

1 Fund plc Unconstrained Fixed Income Product Profile Product Details Fund Assets $425,282, Fund Inception Date 12/07/1996 Number of Securities 94 Including Cash SEDOL Bloomberg FTGEMHI ID ISIN IE Base Currency USD Investment Style Unconstrained Overview 1 Emerging market debt strategy that takes an absolute return approach, whereby we will only invest in countries or securities we find attractive, irrespective of benchmark weights Diversified portfolio of hard and local currency emerging market issuers Return Target: 8 10% per annum over the course of a full market cycle Performance Data Average Annual Total Returns (USD %) 2 3 Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs Since Inception (12/07/1996) Fund - GROSS Fund - NET JP Morgan EMBI Global Diversified (USD Based) JP Morgan GBI- EM Broad Diversified ICE BofAML Corporate Plus (USD Hedged) % 10% 0% -10% Mths YTD 1 Yr 3 Yrs 5 Yrs 10 Yrs 20 Yrs Since Inception Fund - GROSS Fund - NET JP Morgan EMBI Global Diversified (USD Based) JP Morgan GBI-EM Broad Diversified ICE BofAML Corporate Plus (USD Hedged) Calendar Year Returns (USD %) Fund - GROSS Fund - NET JP Morgan EMBI Global Diversified (USD Based) Targets represent the goal the strategy seeks against the JP Morgan EMBI Global Diversified (USD Based) and do not take into account management fees or other expenses an investor would incur in the management of its account, which would reduce any returns. There is no assurance that employment of the strategy will result in the intended targets being achieved. 2. Periods of more than one year are annualised.

2 Fund plc Portfolio Manager Insight Market Review Emerging-market (EM) hard-currency government bonds returned 2.30% in the third quarter, as per the JP Morgan s Bond Global Diversified. Ten-year US Treasury yields rose 20 basis points to 3.06%. The spread-to-worst of US-dollar EM government debt narrowed by more than the rise in US benchmark yields during the quarter. EM hard-currency corporate bonds returned 1.21%, as per the ICE BofAML s Corporate Plus, hedged into US dollars. EM corporate spreads narrowed by less than government spreads during the quarter. EM local-currency government bonds (unhedged, in US-dollar terms) posted a loss of 1.91%, as per the JP Morgan Government Bond s Broad Diversified. Many EM currencies registered steep falls during the quarter, but others, such as the Mexican peso, notably rose. Local-currency EM bond yields rose marginally during the quarter. Performance Review 3 US-dollar notes issued by Ukraine s City of Kyiv were the main contributor to the strategy s performance. These defaulted notes were revalued upwards during the quarter, following the settlement, during the third quarter, of a December 2017 agreement between Templeton and City of Kyiv. Participation in a US-dollar loan to Chad s state oil company also boosted returns. The value of this loan rose during the quarter, as rising oil prices made it more likely that 5% of the loan would be repaid ahead of schedule. Exposure to the Turkish lira was the main detractor from the strategy s performance. The value of the lira declined substantially during the quarter as a result of Turkey s current account deficit, interventions by Turkish President Recep Tayyip Erdoğan, and a diplomatic spat between Turkey and the United States that included sanctions imposed by both sides. Outlook & Strategy EM asset prices continued to be volatile in the third quarter. Idiosyncratic stories about Turkey and Argentina dominated news flow and sentiment. The macroeconomic imbalances and political challenges in both countries appear to have been outliers, but a broad range of EM bonds from other nations came under pressure too. International trends continue to be an important influence. Liquidity is tightening, as central banks in developed markets are gradually reducing their stimulus. An escalation of trade tensions, especially between the United States and China, might lead to further downgrades of EM growth estimates. Oil prices have been on an upward trajectory for most of 2018, which has been supportive for most, but not all, EM countries. Following recent corrections in EM bond valuations, we continue to see opportunities within the EM bond universe, but we remain vigilant about idiosyncratic risks in specific countries. Portfolio Characteristics 3,4 JP Morgan EMBI Global Diversified (USD Portfolio Based) Number of Securities Including Cash Yield to Maturity 9.56% 6.19% Yield to Worst 9.55% 6.18% Average Duration 3.35 Yrs 6.67 Yrs Average Credit Quality 5 B+ BB+ Average Weighted Maturity 5.77 Yrs Yrs Duration to Worst 3.95 Yrs 6.67 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, is provided to indicate the average credit rating of the portfolio s underlying bonds and generally ranges from AAA (highest) to D (lowest). The ACQ is determined by assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of debt holdings 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 is provided for informational purposes only. Derivatives are excluded from this breakdown. 2

3 Fund plc Portfolio Diversification 3 Country Allocation Risk Category Allocation 6 One Colombia Mexico South Africa Russia Azerbaijan Peru Trinidad and Tobago China Ukraine Iraq Argentina Nigeria Turkey Georgia Uruguay Tunisia El Salvador Brazil Kazakhstan Indonesia Republic of Angola Chad Ghana GRENADA Ethiopia Republic of Armenia One Two Three Residual Supranational Funds Geographic Allocation 6 MIDDLE EAST / AFRICA Mozambique Gabon Kenya Venezuela Bosnia and Herzegovina Cameroon Egypt Suriname Dominican Republic Uganda Jordan Jamaica Republic of Belarus Cash & Cash Equivalents Supranational Mixed Two LATIN AMERICA Three EASTERN EUROPE Residual FAR EAST / ASIA RESIDUAL 9.14 Supranational 2.31 FUNDS 0.68 Funds 0.68 SUPRANATIONAL % 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Currency Allocation 6 US Dollar Japanese Yen Colombian Peso Mexican Peso Uruguayan Peso South African Rand Ghanaian Cedi-New Turkish Lira Kenyan Shilling Indonesian Rupiah Georgian Lari Euro Egyptian Pound Peruvian Nuevo Sol Kazakhstn Tenge Russian Ruble Dominican Peso Ugandan Shilling Azerbaijani Manat % 20% 40% 60% 80% Sector Allocation 6 Sovereign Corporates Quasi-Sovereign Residual Funds % 10% 20% 30% 40% 50% % 10% 20% 30% 40% 50% 60% 70% 3

4 Fund plc Supplemental Performance Statistics (USD) 7 Standard Deviation (%) 3 Yrs 5 Yrs 10 Yrs Since Inception Fund JP Morgan EMBI Global Diversified (USD Based) Tracking Error (%) Information Ratio Sharpe Ratio Fund JP Morgan EMBI Global Diversified (USD Based) Investment Philosophy Our philosophy is 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 the standard emerging market debt benchmarks, which tend to be concentrated in a few issuers. We believe that a bottom up, research-driven, qualitative investment process, combined with a risk-controlled approach, has the potential to achieve our objective of outperforming standard benchmarks at low levels of absolute risk. Investment Process s investment process can be summarised in three integral steps country allocation, currency allocation and issuer selection. Ongoing Monitoring and Risk Management 1. Country Allocation 2. Currency Allocation 3. Issuer Selection Countries are ranked into three risk categories (high/medium/low) Yield vs. Fundamentals Improving Credit Potential to Help the Strategy Meet its Return Target Hard vs. Local Currency Assessment Yield vs. Risk Volatility Liquidity Relative Pricing Sovereign Credit (Sovereign, Quasi-Sovereign, Corporate) Local Asset Management Corporate Credit Global Macro Equity Investment Team Portfolio Manager Years with Firm Years Experience William Ledward Additional Resources Corporates - High Yield Corporates - Investment Grade Fixed Income Policy Committee Global Sovereign/EMD Local Asset Management Templeton s Equity Product Managers Years with Firm Years Experience Alberto Landi Stuart Lingard Information Ratio and Tracking Error information are displayed for the product versus the JP Morgan EMBI Global Diversified (USD Based). 4

5 Fund plc Important Legal Information The s Fund plc (the Fund) is an investment company with variable capital incorporated in Ireland on 17th January 1996 as a public limited company under registration number The Fund is authorised by the Central Bank of Ireland as a designated investment company pursuant to Section 256 of Part XIII of the Companies Act The Fund s registered office is JPMorgan House, International Financial Services Centre, Dublin Ireland. A copy of the latest prospectus, the annual report and semi-annual report, if published thereafter, can be obtained, free of charge, from the Administrator, J.P. Morgan Administration Services (Ireland) Limited, JPMorgan House, International Financial Services Centre, Dublin 1, Ireland. This document is intended to be of general interest only and does not constitute legal or tax advice, nor does it constitute or form a part of any offer for shares of the Fund or an invitation to apply for shares of the Fund. Nothing in this document should be construed as investment advice. Opinions expressed are the author s at publication date and they are subject to change without prior notice. Subscriptions for shares in the Fund can only be made on the basis of the Fund s most recent Prospectus. 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. References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. es are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. The performance of the index does not include the deduction of expenses and does not represent the performance of any Templeton fund. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund s holding at any one time. No shares of the Fund may be directly or indirectly offered or sold to nationals or residents of the United States of America. The Fund is not registered for public distribution. When performance for either the portfolio or its benchmark has been converted, different foreign exchange closing rates may be used between the portfolio and its benchmark. 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 presentation were provided by third-party sources and Templeton Investments has not independently verified, validated or audited such data. Templeton Investments makes no representations or warranties with respect to the accuracy of this presentation. Templeton Investments shall not be liable to any user of this report or to any other person or entity for the inaccuracy of information contained in this presentation or for any errors or omissions in its contents, regardless of the cause of such inaccuracy, error or omission. Any research and analysis contained in this document has been procured by Templeton Investments for its own purposes. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. The index data referenced herein is the property of Intercontinental Exchange ( ICE ) and/or its licensors and has been licensed for use by Templeton. ICE and its licensors accept no liability in connection with this use. See for a full copy of the Disclaimer. Important data provider notices and terms available at 3. Portfolio information is based on a representative account taken from the Fund. 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, Yield to Worst, Average Duration, Average Weighted Maturity and Duration to Worst 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. 8. 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) Templeton Investments. All rights reserved.