Franklin Templeton Investments has announced the launch of the Templeton Emerging Markets Local Currency Bond fund which sits within the firm’s Luxembourg-registered Franklin Templeton Investment Funds (FTIF) Sicav.
The high-conviction fund applies a benchmark unconstrained approach and invests primarily in the local currency debt of emerging market-based issuers.
FTI’s approach combines in-depth macroeconomic and country-specific research with fundamentals based valuation analysis to capitalise on short-term market inefficiencies and capture long-term potential.
Michael Hasenstab, executive vice president and CIO, and Sonal Desai, senior vice president and director of research for Templeton Global Macro, will manage the fund.
The pair will be supported by Franklin Templeton’s global fixed income platform tallying over 170 investment professionals worldwide.
“Local currency emerging markets have offered some of the most compelling investment opportunities across global fixed income markets, in our view. We’ve recently been focusing on a select set of countries with domestically resilient economies and relatively higher yields,” said Hasenstab.
“The opportunity set in emerging debt markets has expanded dramatically over the last two decades, predominantly driven by a substantially greater issuance of local-currency bonds. Those increased volumes have been largely supported by growing domestic investor bases and strengthening local economies. The net effect in many cases has been improved access to capital for countries, reduced costs of capital, improved local market liquidity and lower credit risks for investors,” he argued.
Vivek Kudva, managing director, EMEA and India at Franklin Templeton Investments commented: “Emerging market local currency bonds have historically provided diversification to other major asset classes. In addition, investors can potentially benefit from the inflation hedge aspect of emerging market currencies while reducing the external debt vulnerabilities associated with hard currency debt.
“This launch is part of Franklin Templeton’s effort to build a clearly defined emerging market debt offering separating local-currency strategies from hard-currency strategies, as these are increasingly viewed as separate asset classes. We believe this fund provides an option for investors with a preference for a pure investment strategy and for those looking for ‘building blocks’ they can incorporate into their overall portfolio.”
Templeton Global Macro had assets under management of over $124bn (€100.4bn) as of 31 December 2017.