Portfolio Manager Perspectives

Jeff Benjamin

New Franklin fund does global locally

Taps firm's asset management operations around the world

Jan 20, 2011 @ 11:05 am

By Jeff Benjamin

Franklin Templeton Investments has expanded the adage “all politics are local” to international investing.

The Franklin World Perspectives Fund, launched Dec. 16, has raised the stakes on the idea of a globally managed mutual fund for U.S. investors. Following in the footsteps of an offshore version launched in October 2008, it taps local asset management operations in offices around the globe.

That is no small distinction, according to Stephen Dover, international chief investment officer for Franklin Templeton's local asset management group.

“The history of investing globally has normally involved an Anglo person getting on a plane” and traveling to a foreign country to do research, said Mr. Dover, who is portfolio manager of the new fund. “But as [the global markets] have developed, the quality of the local money managers have improved as well.”

The fund, which is about two weeks away from having a ticker symbol, allocates slices of the portfolio to autonomous Franklin Templeton asset management offices in India, Vietnam, China, Japan, Korea, Canada, Brazil, Dubai and the United Kingdom.

Franklin Templeton started opening local offices, run by local asset managers, 15 years ago. In total, the local asset management operations now manage $20 billion.

Combing the local expertise into a single fund creates a globally diversified and dynamic portfolio of more than 250 securities, with an annual turnover rate of around 80%.

“This is a fund that is managed 24-7,” Mr. Dover said. “That's a lot different from just having a fund managed whenever the portfolio manager is in the office.”

Mr. Dover is responsible for allocating slices of the portfolio to the local asset managers.

A neutral allocation, he explained, would track the MSCI All Country Index, which Franklin Templeton has tweaked to add a minor weighting in frontier markets such as Vietnam.

The portfolio's largest weighting is the United States, at 40%, compared with a 42% benchmark weight.

The fund is tracking the benchmark with a 25% allocation to Europe.

The next-largest weighting is the Asia-Pacific region at 18%, compared with a 15% benchmark weight.

Other examples of where the portfolio is out of sync with the MSCI index are the 5.5% allocation to Japan, versus 9% for the benchmark; a 3% allocation to Brazil, compared with a 2%; and 1.5% to frontier markets, which make up just 0.5%.

Mr. Dover said that in terms of performance, the impact of the local asset management presence is more important than any benchmark overweighting or underweighting.

“Most of the value will be created by the local managers,” he said. “Instead of just using the research from the local managers, we are empowering the local managers.”

The offshore version of the fund gained 14.8% last year, compared with a 13.3% benchmark return.

For an example of the unique perspective added by the local asset managers, consider the $5.8 billion Templeton World Fund Ticker:(TEMWX), which has 94 positions, only 10 of which are also in the World Perspectives Fund.

“Our local asset management teams provide a bottom-up perspective on market conditions and valuations,” Mr. Dover said. “This insight means that our investments are not limited to the largest and most visible companies in each market but often include less recognizable names.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.


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