The two new funds from Franklin Templeton received Financial Services Authority approval in June 2007 and aim to achieve a total return over the long-term from income, capital appreciation and currency gains, by investing in fixed- and floating-rate debt securities of government and corporate issuers worldwide.

Based in London, John Beck, senior vice president and co-director of Franklin Templeton Fixed Income Group’s international bond department will manage both funds. However, he will be teaming up with California-based Michael Hasenstab, senior vice president and co-director on the Templeton Global Total Return Bond Fund and London-based David Zahn, senior vice president and portfolio manager on the Templeton Strategic Bond Fund.

The portfolio managers will employ an investment process based on in-house research and a combination of top-down portfolio allocation coupled with bottom-up security selection to pick the best investment opportunities from the different sectors and countries within the overall limits.

Minimum investment: £1,000
Initial charge: Up to 3%
Annual management charge: 1.2 %
Contact: www.franklintempleton.co.uk

Philip Johnson says:
By utilising a diversified portfolio across a wide range of fixed-income markets and vehicles, the fund should have the ability to manoeuvre globally across different fixed-interest asset classes and currencies and also the flexibility to position itself to find total return opportunities in a range of business, interest rate and currency cycles.   

The Templeton Strategic Bond Fund, however, aims to deliver a regular income and achieve a positive return over the medium to long term by investing in fixed- and floating-rate debt securities of government and corporate issuers worldwide. At least 80 per cent of the fund’s assets will be invested in sterling-denominated securities (or hedged back to sterling) worldwide and approximately 20 per cent of will be invested in below ‘BBB minus’ bonds, convertibles and income producing preference shares. It has an estimated net yield of five per cent.

Today’s fixed-income market is incredibly large and complex. Within the market are different types of sectors and securities that include corporate bonds, inflation-linked bonds, high-yield bonds and government-issued bonds. Diversifying the fixed-income element of a portfolio can give investors access to the wide range of global opportunities.

There is no pattern as to how different fixed-income sectors have performed, and it’s almost impossible to consistently predict which sector will perform best year by year. Consequently, investing in a number of fixed-income sectors can improve the probability of being invested in the best performing sector.

Investors should be reminded that fixed-income securities can be sensitive to interest rate movements, or changes in governments’ policies. In addition to being affected by the general economic climate, fixed-income securities issued by companies can also be affected by events specific to the company itself or the industry or sector in which it operates. Similarly, fixed-income investments issued in emerging markets are subject to factors such as political and economic instability, social unrest, and potential default.

However, investors looking to move towards this sector should put one or both of these funds high on their list for consideration.  

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