Three Templeton funds for the current environment

A new distribution support system for Franklin Templeton and Turicum Investment Management was presented on Friday November 14 at the Mediterranean Beach Hotel in Limassol.

Designed to help advisors select the most appropriate funds for their clients, the presentation introduced Franklin Templeton Distribution Support, the new distribution support system in Cyprus designed to increase active cooperation with independent financial advisors (IFAs) on the island.

Franklin Templeton is one of the top 5 fund managers in the US and is the largest listed fund manager worldwide. It received the S&P Micropal Award for the best offshore range of funds in 2003 and is currently among the top 10 best performers in the US.

Since Franklin Templeton does not sell funds directly to retail clients, a support system for those who are authorised to sell the funds is a welcome development.

The company has recently launched five new alternative strategy funds and seven traditional offshore mutual funds.

Harshendu Bindal, General Manager, Middle East, Franklin Templeton Investments, told the Financial Mirror some of the benefits of the new support system. He also highlighted three funds which Franklin Templeton believes have good prospects under the current economic environment.

A common platform created

Franklin Templeton started operations in the Middle East about three years ago, based in Abu Dhabi and the United Arab Emirates. From there it covers the Gulf, as well as Lebanon, Jordan, Egypt, Cyprus and Turkey.

"During the last three years we have been selling our funds through various players on the island: IFAs, broking house and some local banks," said Bindal.

"Through the new distribution support system, we now have a sales support service. What we will continue to do is to actively support distributors from our office in Dubai but the idea is to create a level of efficiency, a platform which IFAs can approach for assistance in areas such as marketing, sales and operational issues," he said.

Three recommended funds

As well as introducing the abovementioned 11 new funds, Bindal briefed IFAs attending the seminar on the current economic outlook, both in fixed income as well as the equity market.

Based on the current economic outlook, Bindal highlight three funds which Franklin Templeton thinks will do well in this environment.

The first fund is the Franklin Floating Rate Fund, which comes under the Micropal money market category.

"This fund invests in floating rate securities, which means as interest rates rise, this bond fund will do well even in a rising interest rate market, unlike other bonds funds which will fall in price as interest rates rise," explained Bindal.

The second recommended fund is the Templeton Asian growth fund. This is an Asia ex-Japan fund.

"We feel that when you look at the global economy you are getting mixed signals in the US and Europe. We like Asia because we have more positive outlook on Asian economies and we feel that the valuations are much more reasonable," said Bindal.

Asked whether the Asia fund might be exposed in the longer term to structural weaknesses in the banking sectors of some countries, Bindal explained that the Asia ex-Japan funds is not only highly diversified, but they also have the flexibility to shift weightings if circumstances change.

Finally, the third fund is the renowned Franklin Income Fund, which aims to provide regular income. Launched in 1948 in the US, this fund has never missed a single dividend payment.

It issued quarterly dividends until February 1993, and since then has been issuing monthly dividends--right through the recent bear market.

"It has a great track record and the US parent fund is over USD 8 bln in size. We launched it offshore in 2000 and it has been equally successful offshore," said Bendal.

Bindal explained that the fund's success lies in careful selection of corporate and government bonds as well as dividend-paying shares.

"For example, we would select preferred stock. It has the characteristics of debt (a coupon) as well as equity (dividend payments), so from an income-generating perspective it is better than shares," he explained.

Fiona Mullen