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Revisiting an old question -- What's Up with Templeton Global Bond
It's the value investing problem only with bonds. People would rather invest in debt of countries with zero or even negative interest rates that they think of as safe than emerging market bonds.
I believe it is not really cash as an exposure but a place holder/balance for the derivatives used to get exposure to emerging market and other currencies. But I wasn't just thinking of the closed-end fund GIM but the open end mutual fund TPINX: https://franklintempleton.com/forms-literature/download/406-S I believe there is some cash in there, but if you read the report much of that cash I believe is for currency derivative bets. But I haven't looked closely for a while.
TPINX is a complicated play on currency, credit and duration. ISTR that it performs better with a weakening dollar. I sold my Hasenstab Templeton funds several years ago, and would go back in only if an Hasenstab etf was available !
Mr. Hasenstab was a star bond fund manager several years ago. The long-term returns for TPINX and GIM were exceptional.
Here are some quotes extracted from Karin Anderson's GIM analysis for Morningstar:
12-18-2014 "From Michael Hasenstab's start in December 2001 through Nov. 30, 2014, the fund's 11% annualized gain ranked ahead of all world-bond options."
11-16-2015 "Over the past decade through October 2015, the fund's 9% annualized gain bested all world-bond and emerging-markets bond closed-end funds and beat out all world-bond open-end funds as well."
I purchased GIM during December 2013 when it was selling at an attractive discount to NAV. Unfortunately, the discount widened during my holding period of almost 5 years! Mr. Hasenstab is a contrarian investor and the fund's holdings were distinctive. He had long-standing short positions against the euro and the yen. At the same time, exposure to emerging market currencies was significant. Although GIM was categorized as a world bond fund, Mr. Hasenstab emphasized emerging market bonds instead of bonds from developed markets. He purchased debt from Ukraine, Hungary, Ireland, and Argentina which other investors shunned. GIM maintained a short duration since Mr. Hasenstab was concerned about inflation. I haven't paid close attention to GIM/TPINX for over two years.
Comments
Looking at: https://www.cefconnect.com/fund/GIM they have 33% in cash and a large stake in US Treasuries.
I believe there is some cash in there, but if you read the report much of that cash I believe is for currency derivative bets. But I haven't looked closely for a while.
The long-term returns for TPINX and GIM were exceptional.
Here are some quotes extracted from Karin Anderson's GIM analysis for Morningstar:
12-18-2014
"From Michael Hasenstab's start in December 2001 through Nov. 30, 2014, the fund's 11% annualized gain ranked ahead of all world-bond options."
11-16-2015
"Over the past decade through October 2015, the fund's 9% annualized gain bested all world-bond and emerging-markets bond closed-end funds and beat out all world-bond open-end funds as well."
I purchased GIM during December 2013 when it was selling at an attractive discount to NAV.
Unfortunately, the discount widened during my holding period of almost 5 years!
Mr. Hasenstab is a contrarian investor and the fund's holdings were distinctive.
He had long-standing short positions against the euro and the yen.
At the same time, exposure to emerging market currencies was significant.
Although GIM was categorized as a world bond fund, Mr. Hasenstab emphasized emerging market bonds instead of bonds from developed markets.
He purchased debt from Ukraine, Hungary, Ireland, and Argentina which other investors shunned.
GIM maintained a short duration since Mr. Hasenstab was concerned about inflation.
I haven't paid close attention to GIM/TPINX for over two years.