Franklin Templeton Investments has launched the Franklin Flexible Alpha Bond Fund, which aims to provide attractive risk-adjusted total returns over a full market cycle by allocating its portfolio across a broad range of global fixed income sectors.
"Given the recent concerns with respect to rising interest rates and the related desire for additional diversification in the fixed income markets, we believe Franklin Flexible Alpha Bond Fund should fulfil investors' rapidly growing demands for an alternative to traditional core fixed income allocations," says the fund's co-lead manager, Michael Materasso, senior vice president and co-chair of the Franklin Templeton Fixed Income Policy Committee. "The fund seeks to complement traditional fixed income asset classes by potentially providing low correlation to conventional holdings."
The fund aims to provide attractive risk-adjusted returns generated from various sources — other than primarily from interest rates – by allocating the fund's portfolio across various risks such as credit, currency, and duration risks. In employing this strategy, the fund's portfolio managers will have the flexibility to invest across all sectors of fixed income of any country, sector, quality, maturity or duration, and without reference to a benchmark index.
The fund's management team uses a "top-down" analysis of macroeconomic trends, combined with "bottom-up" fundamental analysis to identify potential investment opportunities. In selecting investments for the fund, the managers choose securities in various market sectors based on their assessment of changing economic, market, industry and issuer conditions. As part of their risk management strategy, the fund managers may actively employ long and short positions to navigate market cycles and tactically manage broad market risks from interest rate, credit, currency and country exposures.
"We take an unconstrained investment approach with dynamic sector rotation, active currency management, security selection and relative value positioning, while aiming to manage various risks, such as duration," says the fund's co-lead manager David Yuen, CFA(1), FRM(2), senior vice president and director of quantitative strategy and risk management for Franklin Templeton Fixed Income Group.
The fund seeks to provide total return through a combination of current income and capital appreciation by investing at least 80 percent of its net assets in bonds and investments that provide exposure to bonds, including global debt obligations of any credit quality, maturity or duration, and derivatives and other instruments that provide exposure to bonds.