Paying the price for currency hedging

This Bronze-rated Franklin fund still has an edge that stems from a seasoned management team and a proven multiasset approach.

Jeffrey Bunce, CFA 6 September, 2016 | 5:00PM
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 Franklin Mutual Global Discovery earns a Morningstar Analyst Rating of Bronze for its seasoned management team and integrated value approach. However, detrimental currency hedging and lacklustre recent performance temper our conviction.

Management's bottom-up approach is primarily oriented toward cheap stocks but also includes distressed debt and merger-arbitrage opportunities. Focusing on fundamentals helps them look past short-term drops and buy more when they think a security has become a bigger bargain. In addition, a thorough evaluation of a firm’s capital structure helps them identify the best return opportunities.

A hallmark of the fund has been its cautious approach, which the managers continue to employ. The team pays close attention to downside risk when selecting stocks. Diversification is also key. Because it is tough to judge the timing of turnarounds, management spreads its bets across 135 stock and bond holdings.

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About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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