A bond fund with bold emerging markets exposure

With a lower fee, Silver-rated Templeton Global Bond now serves investors better.

Jeffrey Bunce, CFA 23 March, 2016 | 5:00PM
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In March 2015, Franklin Templeton Investments lowered the management fee on the A Series of  Templeton Global Bond from 1.75% to 1.25%. This followed a similar fee cut on the fund's F Series for fee-based accounts a year earlier. What was once one of the most expensive funds in the category is now more reasonably priced, and investors are the direct beneficiary. As such, its Morningstar Analyst Rating has been upgraded from Bronze to Silver to reflect the lower price tag.

Templeton also changed the risk classification on the fund in 2015 from “medium-to-low” to “low” based on recent historical volatility, but investors need to be aware that by most measures, Templeton Global Bond is among the boldest entrants in the global fixed-income category. Most notably, its high allocation to emerging-markets has caused it to display higher volatility than the average peer and sport one of the highest correlations to equities in the group over the longer term. Further, in 2007 the fund lost 6.5% and in 2008 it gained 24.1%. Funds with this return pattern don't typically behave this way by avoiding risk.

However, the risks have been well worthwhile. Manager Michael Hasenstab's investment themes and ability to find the right bargains have led to topnotch long-term performance. His experience, a skilled and generally stable analyst bench, and the fund’s consistent approach are all strengths that set this fund apart.

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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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