Templeton Global Bond N(acc)EUR-H1 |
by Mike Mulach
Templeton Global Bond’s well-resourced team stands out, though risk management concerns cloud the strategy’s strengths. Lead manager Michael Hasenstab pioneered the team’s distinctive process and makes the final calls for Franklin Templeton’s global macro suite of strategies. Longtime analyst and co-head of research Calvin Ho has served as comanager since 2018, and a solid macro analyst team supports the duo. This team has recently seen some turnover but continues to boast deep global expertise and experience in navigating difficult market environments. The strategy’s high-conviction, long-term-oriented process is underpinned by thorough global rates and currency research. In line with the team’s macro views, the strategy has emphasized exposure to emerging-markets debt for much of the past decade. Hasenstab and his team have always embraced concentration and have been willing to back their views to the hilt. This differentiated approach offers some advantages over its benchmark and many peers, though the team has not always managed this flexibility well. Notably, the level and complexity of risk-taking here have increased in recent years. That has included a short on U.S. Treasuries from 2016 to early 2020 that led to a negative overall duration, ample concentration among its emerging-markets local bond positions, and aggressive currency positions that can be susceptible to prolonged periods of fickle markets. Since mid-2021, the team has committed to keeping the strategy’s option-adjusted duration positive, though other significant concentration risks remain. Missteps in each of these areas, including the disappointing U.S. Treasury short (removed in early 2020), a heavy focus on highly volatile Latin American debt, and long Japanese yen exposure have stung. Citing slowing economic growth and a lower probability of surprise rate hikes in the United States, the team made a large bet against the U.S. dollar, mainly in favor of Asian currencies, starting in the second half of 2022, which hampered performance. In fairness, the team’s long-standing aversion to developed-markets duration was ultimately rewarded as yields rose sharply throughout 2022: The strategy outperformed most peers and its Morningstar Category benchmark significantly. While it can make up ground in a hurry, some competing strategies can better utilize a benchmark-agnostic mandate to achieve results commensurate with their risks over time. |
Morningstar Pillars | |
People | Above Average |
Parent | Average |
Process | Average |
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