Both products were first launched in Europe last June, and this week were authorised by the Securities and Futures Commission (SFC) for sale to Hong Kong retail investors, according to the regulator’s website.
The Franklin Global Income Fund has amassed $27m to the end of August, and has a 45% allocation to fixed income securities and a 34% weighting to equities, its factsheet shows.
The average credit rating of the bond portfolio is BBB, although high yield issues comprise 17.8% of the total portfolio. The main sector weightings in the equity segment are information technology (9.6%), healthcare (9.2%) and financials (7.43%), with top individual holdings including Asian tech heavyweights Alibaba, Taiwan Semiconductor Manufacturing and Tencent.
“We have been seeing strong inflows into global multi-asset funds with a focus on income,” Franklin Templeton spokeswoman told FSA, adding that “the launch of a global exposure version of the Franklin Income Fund best suits the needs of the Hong Kong market”.
The $1.25bn Franklin Income Fund is two decades old and is evenly split between equities and fixed income, with 41% allocated to each, and the balance invested in convertibles and equity-linked notes, according to its factsheet.
It has been managed by Edward Perks since 2002, who is helped by Todd Brighton and Brendan Circle; the three managers also run the new Global Income product
The seasoned fund has posted a 168.6% cumulative return since its initial launch in July 1999, outperforming the 112.9% average return of its mixed asset international peers available to Hong Kong retail investors, according to FE Fundinfo data.
However, its three-year cumulative return has suffered through lagging the recovery in risk asset prices from late March, and from suffering a slump in late June. The fund is down 1.7% since September 2017, compared with a positive 6.1% rise by its peers. Its annualised volatility of 12.93% is higher than the 11.27% sector average during the period, according to FE Fundinfo.
Several other firms have also been promoting income-generating funds, as the search for income has intensified after major central banks lowered interest rates further to stimulate economies during the Covid-19 pandemic.
Amundi is the most recent to launch fixed income products in Hong Kong. Other managers that are expected to launch income-generating funds include Hang Seng Investment Management, Alliance Bernstein, Manulife Investment Management, Goldman Sachs Asset Management and GF International Investment Management, according to SFC records.
Unconstrained fixed income
Franklin Templeton’s second new product, the Global Total Return II Fund, is being offered to Hong Kong investors due to “the consistently strong demand for global fixed income strategies that adopt an unconstrained approach,” said the spokeswoman.
The firm’s existing $8.54bn Global Total Return Fund has been distributed in Hong Kong for several years, and was incepted as a Sicav in August 2003.
It has generated a 178% cumulative return since launch, compared with an 83.6% average return by global fixed income funds available in Hong Kong, according to FE Fundinfo.
The fund’s factsheet shows its largest bond country allocations are to Japan, Mexico and South Korea. It ha a 62.6% weighting to the US dollar, and large short positions in the Euro and Australian dollar
The fund is co-managed by Michael Hasenstab and Calvin Ho, who are also managers of the mark-II version.
“The Templeton Global Total Return Fund has been one of our most popular products in Hong Kong,” said the spokeswoman.
The fund launches come while Franklin Templeton adjusts its operations following its recent acquisition of Legg Mason.
Franklin Templeton completed its $4.5bn purchase of the Baltimore-based fund manager in August, creating a combined organisation with $1.4trn of AUM. Research firm Morningstar said last month that the biggest impact was likely to be on the fixed income business, which would account for nearly half of managed assets in the new entity.
Legg Mason’s affiliates include Brandywine Global, Clarion Partners, Clearbridge Investments, Martin Currie, QS Investors, Royce Investment Partners, and bond specialist Western Asset Management.
