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Goldman Goes After Hasenstab and Templeton

Amongst our coverage, BEN (Sell) is most exposed with 30% of fixed income holdings in high yield securities per eVestment, and with 37% of fixed income exposed to emerging market debt in particular. Importantly, Templeton Global Bond ($100bn in total; $59bn in mutual funds) – BEN’s largest fixed income fund – has seen meaningful outflows YTD (-$7.6bn from retail; -13% annualized rate) and could persist given the deterioration in excess performance (-460bps vs. benchmark YTD)."


  • What the heck does "Templeton Global Bond ($100bn in total, $59bn in mutual funds)" mean? That Templeton Global Bond has $100B AUM, of which $59B are invested in other funds? I doubt that.

    The $100b is not Franklin Templeton's AUM (Wiki reports $844B - even if this is stale data, it shows that F-T has a lot more than $100B).

    Maybe it's talking about total AUM that the Global Bond team is managing, of which $59B are in mutual funds (the rest being in SMAs, collective trusts, etc.) It then goes on to talk about retail outflows - does retail mean "mutual funds" (including institutional share classes), or what?

    That outflow ($7.6B YTD) is then reported to be 13% annualized. But it looks like the 13% came from dividing $7.6B by $59B (12.9%). Problem is that this would represent 13% pulled out YTD, which would mean an annualized rate of 14% or so.

    It says that the fund is underperforming its benchmark by 4.6% YTD. The prospectus says that its benchmark is Citigroup World Government Bond Index (Citi WBGI USD). M* reports the fund is outperforming its benchmark by almost 3.5% YTD.

    Okay, so the numbers (whether this is a quote of Goldman, or zerohedge's creative accounting) are suspect. The fact remains that Templeton Global Bond has likely had sizeable outflows. Zacks, citing M*, claims $6B in fund outflows between Aug 2014 and Aug 2015.

    But so what? M* also reports that TPINX/TGBAX is roughly 50% cash. (To M*, cash includes debt that matures in under a year.) That means that the fund could sustain a massive stampede without having to dip into illiquid securities. Nor does ZeroHedge discuss the fund's holdings, or what percentage is high yield. It just mentions this EM fund next to HY funds, and expects you to jump to conclusions.

    What I see is an EM fund that is still performing above its peers (43rd percentile YTD). People who are fleeing the sector would jump from whatever fund they owned (so shouldn't the blog be looking at EM funds with less liquid holdings?). People who might flee weaker funds (but not the sector) will be hanging around.
  • Jeez, msf... sometimes you can get so picky.
  • edited December 2015

    Don't forget that GIM is the CEF version of TGBAX/TPINX when doing calculation on his/its AUM.
  • Regarding GIM - that's certainly money managed by the same management team as Templeton Global Bond. If we're trying to figure out where that $100B figure comes from however, it's just a drop in the bucket (<$1B). Could be part of the overall figure, who knows?

    If one likes Templeton Global Bond, this pseudo clone might be a good option now. Tts NAV performance YTD is a little better but similar while its market price has been taking a beating - its discount has increased by around 4% this year (current at 12.90%).

    I write pseudo-clone because there are substantial differences, e.g. M* says GIM is only 1/3 in cash (as M* defines cash), as opposed to 1/2 for Templeton Global Bond. This could be because GIM does not need to satisfy redemption requests, or because it has tended to be slightly more aggressive than its open-end fraternal twin.

  • @msf wow, thanks for your note re. GIM. It has been ages since I looked at its portfolio and had no idea of its differing structure.......hmmmm, interesting.
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