The fund is a sub-fund of the Luxembourg-registered Franklin Templeton Investment Funds (FTIF) range and is presently only available in Luxembourg. Global investors will be able to access it, subject to regulatory approval, in the coming weeks.
Using a high conviction, benchmark unconstrained approach, the fund aims to maximise total investment return by investing predominately in the local-currency debt of issuers in emerging market countries.
It will be managed by chief investment officer Michael Hasenstab and director of research for Templeton Global Macro Sonal Desai, with support from the 170-global fixed income platform worldwide.
Hasenstab said: “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.
“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.”
Franklin Templeton said the team will use a multi-tiered approach combining in-depth macroeconomic and country-specific research with fundamentals-based valuation analysis to capitalize on short-term market inefficiencies and capture long-term potential.
Martyn Gilbey, UK country head, said: “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.”
The news follows a series of changes at Franklin Templeton, with Carlos Hardenberg, lead manager for the Templeton Emerging Markets Investment Trust (Temit) resigning and Winterflood Investment Trusts removing Temit from its recommend list of funds until the future direction is clearer.
Meanwhile, at the end of January, EM pioneer Mark Mobius also stepped down as executive chairman of the Templeton Emerging Markets Group (TEMG) to formally retire and Manraj Sekhon was appointed as chief investment officer of emerging market equity, effective from 19 February.
