Franklin Global Aggregate Unhedged Composite
Investment Grade
Fixed Income
31 March 2017
Product Profile
Product Details
Strategy Assets
Inception Date
Base Currency
Investment Style
£53,836,843.71
31/12/2001
USD
Investment Grade
Overview1
• Multi-sector global fixed income funds that invest in government, securitised and corporate
sectors, and may tactically invest up to 20% of the portfolio in high yield, bank loans, and
emerging market debt.
• Alpha Target: 75–175 basis points (gross of fees)
• Expected Tracking Error Target: 150–350 basis points (gross of fees)
Performance Data
Average Annual Total Returns (GBP %)2
Franklin Global
Aggregate Unhedged
Composite GROSS
Franklin Global
Aggregate Unhedged
Composite - NET
Bloomberg
Barclays Global
Aggregate Index
3 Mths
YTD
1 Yr
3 Yrs
5 Yrs
10 Yrs
Since Inception
(31/12/2001)
-0.13
-0.13
11.33
9.95
6.82
8.91
6.97
-0.23
-0.23
10.89
9.52
6.39
8.43
6.54
0.56
0.56
12.76
9.62
5.43
8.09
5.88
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Calendar Year Returns (GBP %)
Franklin Global
Aggregate Unhedged
Composite GROSS
Franklin Global
Aggregate Unhedged
Composite - NET
Bloomberg
Barclays Global
Aggregate Index
2016
2015
4.39
10.94
-2.35
2013
2012
2011
2010
9.19
-0.16
39.79
2008
2007
16.57
3.97
10.50
-2.74
6.60
0.36
8.65
-0.60
39.55
8.42
21.77
2.45
6.84
-4.41
-0.26
6.43
8.86
-4.81
45.08
7.64
17.04
2014
7.02
1.49
2009
8.60
Portfolio Manager Insight
Market Review
• Global bond markets delivered positive returns over the first quarter of 2017 in US-dollar
terms, although most of these gains were due to the weakness of the US currency during
the period.
1. Targets represent the goal the strategy seeks against the Bloomberg Barclays Global Aggregate Index and do not take into
account management fees or other expenses an investor would incur in the management of its account, which would reduce
any returns. There is no assurance that employment of the strategy will result in the intended targets being achieved.
2. Periods of more than one year are annualised. Past performance is not an indicator or a guarantee of future performance.
For Institutional / Professional Investors Only. Not For Distribution To Retail Investors.
Franklin Global Aggregate - Unhedged Composite
31 March 2017
• The US Treasury market rose ahead of the US Federal Reserve’s (Fed’s) widely anticipated decision to raise interest rates at its March meeting,
but sentiment reversed after the Fed’s accompanying statement turned out to be more dovish than expected.
• The US dollar was also affected, and by March had fallen to its lowest point on a trade-weighted basis since the US presidential election, before
recovering some of its losses towards the end of the period.
Performance Review3
• During the first quarter, the strategy’s performance relative to that of its benchmark, the Bloomberg Barclays Global Aggregate Index, was
hindered by its currency allocation. However, the strategy’s positions denominated in currencies other than the US dollar, euro, Japanese yen
and British pound contributed to performance relative to the benchmark.
• The strategy’s underweight exposures to the stronger Japanese yen and euro detracted from performance relative to the benchmark.
• In contrast, the strategy’s positions in local-currency Polish bonds contributed to relative results.
Outlook & Strategy
• The narrative that has dominated since the US presidential election has been increasingly called into question in recent weeks, most significantly
in terms of previous perceptions of a more hawkish Fed and the potential for significant US fiscal expansion under the new administration.
• Market predictions for US monetary policy have reverted to a more modest tightening path, in light of the Fed’s surprisingly dovish statement
accompanying its March rate hike and the political stalemate on healthcare policy.
• How the setback on healthcare impacts the Trump administration’s broader agenda on tax reform and regulation remains uncertain, though we
may see a further reining-in of previously elevated market expectations.
• In the medium term we still see underlying global economic conditions as indicative of slow but steady growth.
• Sentiment indicators may have picked up across much of the world, but large parts of the global economy continue to rely on substantial
monetary stimulus, and political risk remains a significant concern for investors.
• We anticipate such a backdrop could lead to increased market volatility, in contrast to the relative calm seen so far this year.
Portfolio Characteristics of a Representative Account3,4
Portfolio
Bloomberg Barclays Global Aggregate
Index
Yield to Maturity
2.57
1.64
Average Duration
5.72
Number of Securities Including Cash
Yield to Worst
Average Credit Quality5
Average Weighted Maturity
Duration to Worst
97
2.56
A+
6.70
5.66
20114
1.64
6.97
AA-
8.73
6.97
5. The average credit quality (ACQ) rating may change over time. The portfolio itself has not been rated by an independent rating agency. The letter rating, which may be based on bond ratings
from different agencies, is provided to indicate the average credit rating of the portfolio’s underlying bonds and generally ranges from AAA (highest) to D (lowest). The ACQ is determined by
assigning a sequential integer to all credit ratings AAA to D, taking a simple, asset-weighted average of debt holdings by market value and rounding to the nearest rating. The risk of default
increases as a bond’s rating decreases, so the ACQ provided is not a statistical measurement of the portfolio’s default risk because a simple, weighted average does not measure the
increasing level of risk from lower rated bonds. The ACQ is provided for informational purposes only. Derivatives are excluded from this breakdown.
For Institutional / Professional Investors Only. Not For Distribution To Retail Investors.
2
Franklin Global Aggregate - Unhedged Composite
31 March 2017
Portfolio Diversification of a Representative Account3
Geographic Weightings vs. Bloomberg Barclays Global Aggregate Index6
Sector Weightings vs. Bloomberg Barclays Global Aggregate Index6
Percent of Total
Percent of Total
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Currency Allocation6
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Credit Quality Rating7
Percent of Total
Percent of Total
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7. Ratings shown are assigned by one or more Nationally Recognized Statistical Rating Organizations (‘NRSRO’), such as Standard & Poor’s, Moody’s and Fitch. The ratings are an indication
of an issuer’s creditworthiness and typically range from AAA or Aaa (highest) to D (lowest). When ratings from all three agencies are available, the middle rating is used; when two are available,
the lowest rating is used; and when only one is available, that rating is used. Foreign government bonds without a specific rating are assigned the country rating provided by an NRSRO, if
available. The NR category consists of rateable securities that have not been rated by an NRSRO. The N/A category consists of nonrateable securities (e.g., equities). Cash includes
equivalents, which may be rated. Derivatives are excluded from this breakdown. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to
change.
For Institutional / Professional Investors Only. Not For Distribution To Retail Investors.
3
Franklin Global Aggregate - Unhedged Composite
Supplemental Performance Statistics (GBP)8,9
Standard Deviation
Franklin Global
Aggregate - Unhedged
Composite
Bloomberg Barclays
Global Aggregate Index
Tracking Error
Information Ratio10
Sharpe Ratio
Franklin Global
Aggregate - Unhedged
Composite
Bloomberg Barclays
Global Aggregate Index
3 Yrs
5 Yrs
10 Yrs
Since
Inception
9.97
8.63
9.35
8.29
10.11
8.86
9.65
8.48
2.70
2.84
3.07
2.66
0.96
0.74
0.82
0.56
0.91
0.57
0.71
0.42
0.12
0.49
0.27
0.41
Historical Long-term Performance
Quarterly rolling five-year gross returns in USD (%) since 31/12/2001 as of
31/03/2017
Supplemental Performance Statistics
31 March 2017
Investment Philosophy
We believe that a portfolio of active, low-correlated positions has the potential to enhance investment returns over time. We also believe that no
single holding or allocation should dominate the portfolio, and that risk is a resource to be allocated strategically within client-defined guidelines.
Investment Process
Franklin Templeton’s value-based investment style combines the qualitative analysis of macroeconomic factors with sophisticated quantitative tools.
We seek to determine the most attractive investment opportunities and formulate the optimal risk/return profile for portfolios. Qualitative analysis is
used in identifying secular trends and evaluating each of the factors that we believe should typically affect countries, currencies and sectors.
Quantitative research and risk management are integral parts of the process and are incorporated throughout. Proprietary and non-proprietary
systems provide the framework to help manage these components and understand the sources of risk and expected returns.
Our investment process is structured to pursue diversified sources of alpha across securities, sectors and global markets. We aim to add value by
exploiting market inefficiencies through both top-down allocation decisions and bottom-up security selection on a tactical and strategic basis.
1
Formulate Macroeconomic Themes
•
•
•
•
•
•
Sector rotation
Country allocation
Country duration
Yield curve position
Currency allocation
Volatility
Fixed Income Policy Committee
(FIPC) and Multi-Sector Strategists
2
Develop Investment Strategy
3
Target allocations by sector and
select securities
•
•
•
•
•
•
Corporate Credit
Global Sovereign Debt
Emerging Markets Debt
Mortgages
Bank Loans
Municipals
Dedicated Sector Teams
Goal Is to Build a Portfolio of
Active, Low-Correlated Positions
• Client objectives
• Investment strategy targets
• Diversification guidelines
• Risk/return enhancement
by position
Global Aggregate Team, Quantitative
Risk Team and Performance Analysis
and Investment Risk (PAIR) Team
8. Risk statistics are calculated using gross of fees composite performance.
9. Information Ratio and Tracking Error information are displayed for the product versus the Bloomberg Barclays Global Aggregate Index.
For Institutional / Professional Investors Only. Not For Distribution To Retail Investors.
4
Franklin Global Aggregate - Unhedged Composite
Investment Team
Franklin Global Aggregate - Unhedged Management Team
John Beck
31 March 2017
Years with Firm
Years Experience
10
23
27
David Zahn, CFA, CPA
Michael Materasso
28
Warren Keyser
30
Rod MacPhee, CFA
3
Vi-Minh Tran, CFA
Additional Resources
Bank Loans
Global Sovereign/EMD
Municipals
Product Managers
Alberto Landi
18
Corporates - High Yield
Local Asset Management
Quantitative
30
45
32
10
22
Corporates - Investment Grade
MBS
Years with Firm
Years Experience
5
19
Stuart Lingard
For Institutional / Professional Investors Only. Not For Distribution To Retail Investors.
8
8
5
Franklin Global Aggregate - Unhedged Composite
31 March 2017
Important Legal Information
Franklin claims compliance with the Global Investment Performance Standards (GIPS®).
Franklin (the “firm”) encompasses the equity, fixed income and balanced accounts managed by Franklin Advisers, Inc., and related Franklin affiliates, including, effective 1 January 2007, the
equity accounts managed by the institutional investment teams of Franklin Templeton Institutional, LLC under the former firm name of Fiduciary Global Advisors. The combined equity assets of
Franklin and Fiduciary Global Advisors form the Franklin Equity Group (formerly Franklin Global Advisers prior to 30 June 2010) unit of Franklin. Effective 1 January 2006, the fixed income
assets managed from that date forward by Franklin Templeton Institutional, LLC (“FTI”) or its related affiliates (managed previously by Fiduciary Trust Company International - Institutional
Division or “FTCI’s Institutional Division”) that went through the institutional portfolio review process were combined with the fixed income assets of Franklin to form the Franklin Templeton Fixed
Income unit of Franklin.
Franklin Global Aggregate - Unhedged Composite consists of all portfolios managed on a fully discretionary basis with an investment objective that seeks to achieve above average total return
by investing primarily in global bonds that can be described as from “core” sectors: global government bonds, mortgage-backed securities, agencies and global corporate bonds. The remaining
securities may be invested in “non-core” sectors: emerging market debt, global high yield bonds and global inflation-linked securities (including Treasury Inflation Protected Securities or “TIPS”).
The strategy regularly uses currency forwards, options, interest rate futures and other derivatives such as swaps (including credit default swaps and total return swaps) for hedging purposes or
for investment to control risk or assume tactical exposure to various foreign currencies or asset classes consistent with the investment objective. The strategy purchases TBA (To Be
Announced) mortgage-backed securities and engages regularly in mortgage dollar rolls. In addition, the firm regularly uses foreign currency forward contracts in conjunction with the normal
settlement of security trades in currencies other than the base currency of each account.
Total returns are presented in British pounds both gross and net of investment advisory fees, are inclusive of commissions and transaction costs, and assume reinvestment of any dividends,
interest income, capital gains, or other earnings. Periods greater than one year are shown as average annual total returns. Performance data is shown rounded to the nearest hundredth. Past
performance is not an indicator or a guarantee of future performance.
The Bloomberg Barclays Global Aggregate Index is a market value weighted fixed income index comprised of investment grade securities from global and regional fixed income markets. The
benchmark is broadly indicative of the style of the composite and is provided for comparative purposes only to represent the investment environment existing during the time periods shown.
Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.
To receive a complete list and description of Franklin composites (including any single account mutual fund composite) and/or a presentation that adheres to the GIPS® standards for any
composite, contact your Franklin Templeton institutional representative at +1.800.321.8563.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
Important data provider notices and terms available at www.franklintempletondatasources.com.
3. Portfolio information is based on a representative account taken from the Franklin Global Aggregate - Unhedged Composite. The information is historical, may not reflect current or future
characteristics and may vary significantly among individual separate accounts depending on a variety of factors such as portfolio size, specific investment guidelines and inception dates of the
individual accounts.
4. Yield to Maturity, Yield to Worst, Average Duration and Average Weighted Maturity reflect certain derivatives held in Portfolio (or their underlying reference assets).
6. Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding use of derivatives, unsettled trades or
other factors. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change.
10. Information ratio is a way to evaluate a manager’s ability to outperform a benchmark in relation to the risk that manager is assuming, with risk defined as deviation from the benchmark. This
measure is calculated by dividing the portfolio’s excess return (portfolio return less the benchmark return) by the tracking error (derived by taking the standard deviation of the monthly
differences between the portfolio return and the benchmark return over time).
For Institutional Professional Investors only—not for distribution to retail clients. This material is intended to be of general interest only and should not be construed as individual
investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are
those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not
intended as a complete analysis of every material fact regarding any country, region or market. All investments involve risks, including possible loss of principal.
This material is made available by the following Franklin Templeton entities in those countries where it is allowed to carry out relevant business: Europe: Franklin Templeton Investment
Management Limited (FTIML), registered office: Cannon Place—5th Floor, 78 Cannon Street, London EC4N6HL. Tel +44 (0) 20 7073 8500. Authorised and regulated in the United Kingdom by
the Financial Conduct Authority and authorised to conduct specific investment business in other European countries either via MiFID outward service or via any of the following outward
branches in: • Germany: FTIML Branch Frankfurt, Mainzer Landstr. 16, 60325 Frankfurt/Main, Germany. Tel +49 (0) 69/27223-557, Fax +49 (0) 69/27223-622,
[email protected] • Netherlands: FTIML Branch Amsterdam, World Trade Center Amsterdam, H-Toren, 16e verdieping, Zuidplein 134, 1077 XV Amsterdam, Netherlands. Tel
+31 (0) 20 575 2890 • Romania: FTIML Branch Bucharest, 78-80 Buzesti Street, Premium Point, 7th-8th Floor, 011017 Bucharest 1, Romania. Registered with Romania Financial Supervisory
Authority under no. PJM01SFIM/400005/14.09.2009, authorised and regulated in the UK by the Financial Conduct Authority. Tel +40 21 200 96 00, Fax +40 21 200 96 30,
www.franklintempleton.ro • Spain: FTIML Branch Madrid, Professional of the Financial Sector under the Supervision of CNMV, José Ortega y Gasset 29, Madrid, Spain. Tel +34 91 426 3600,
Fax +34 91 577 1857 • Sweden: FTIML Branch Stockholm, Blasieholmsgatan 5, SE-111 48, Stockholm, Sweden. Tel +46 (0) 8 545 012 30, [email protected] • Switzerland:
Franklin Templeton Switzerland Ltd., Stockerstrasse 38, CH-8002 Zurich, Switzerland. Tel +41 44 217 81 81, Fax +41 44 217 81 82, [email protected] South Africa: Franklin Templeton
Investments SA (PTY) Ltd., which is an authorised Financial Services Provider. Kildare House, The Oval, 1 Oakdale Road, Newlands, 7700 Cape Town, South Africa. Tel +27 (21) 831 7400, Fax
+27 (11) 341 2301, www.franklintempleton.co.za Dubai: Issued by Franklin Templeton Investments (ME) Limited, authorised and regulated by the Dubai Financial Services Authority. Dubai
office: Franklin Templeton Investments, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E. Tel +9714-4284100, Fax +9714-4284140
Please visit www.franklinresources.com to be directed to your local Franklin Templeton website with further contact details/information.
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