Franklin Templeton to drop Templeton-branded domestic laggards

Rudy Luukko 4 December, 2014 | 6:00PM
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Franklin Templeton Investments Corp. is seeking to eliminate via mergers its chronically underperforming domestic equity and tactical balanced funds offered under the Templeton brand name. The company wants to merge these laggards into existing funds managed by its Calgary-based Bissett Investment Management division.

Subject to investor approval at meetings to be held on Feb. 27, 2015, the merging funds are Templeton Canadian Stock, its corporate-class version Templeton Canadian Stock Corporate Class and Templeton Canadian Balanced.

They're to be merged into Franklin Bissett Canadian EquityFranklin Bissett Canadian Equity Corporate Class and Franklin Bissett Canadian Balanced, respectively.

The mergers are to be completed on or about March 13. If the mergers are approved, investors in the merging funds will find their assets under new management with different investment approaches. Managed internally by Toronto-based Franklin Templeton personnel, the Templeton funds employ a value discipline for stock selection. The Bissett team's discipline is growth at a reasonable price (GARP).

In the case of the proposed balanced-fund merger, the continuing fund is in a different category from the merging Templeton fund. Templeton Canadian Balanced, which is in the Tactical Balanced category, has a mandate to actively manage its allocation to domestic equities and fixed income, and hold up to 30% of its assets in foreign securities. The continuing fund, Franklin Bissett Canadian Balanced, is a fund of funds that is in the Canadian Neutral Balanced category. Its strategy is to hold 30% to 50% in equities under normal market conditions, and up to 40% in foreign securities.

In sharp contrast to the Templeton funds, the continuing Franklin Bissett funds are much larger and with excellent track records. For example, the $2.7-billion Franklin Bissett Canadian Equity is a top-quartile performer in the Canadian Equity category over the past one, three, five and 10-year periods ended Oct. 31, and has a 5-star Morningstar Rating.

At the opposite end of the returns and ratings standings is Templeton Canadian Stock, a fourth-quartile performer over the same periods that has a 1-star Morningstar Rating for its historical risk-adjusted returns. Offered since 1989, the fund has been shrinking in size because of redemptions. At a recent $75 million in assets, it's down from $130 million at the end of 2009.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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