Investments  

Franklin Templeton launches emerging market bond fund

Franklin Templeton launches emerging market bond fund

Franklin Templeton has launched a fund to invest in emerging market bonds.

The fund will buy debt in hard currency, that is, debt issued in dollars or other developed market currencies, rather than the currency of the issuer of the debt.

This means investors are not exposed to the fluctuations of emerging market currencies, which are inclined to be volatile.

The fund, which launched on January 21, is managed by Nicholas Hardingham, with co managers William Ledward and Stephanie Ouwendijk.

Mr Hardingham said: "This new strategy will invest in debt that is denominated in hard currencies. Additionally, exposure will be taken from quasi-sovereign and corporate issuers, resulting in a much larger investment universe, which gives us further opportunities to add alpha.

"Historically, we have found excellent investment opportunities in less efficient markets that many investors tend to avoid."

The fund will initially select by country and then select individual bonds.

Tom Sparke, investment director at GDIM, a discretionary fund management business in Cambridge, said: At a time when fixed income markets are more difficult than in many years diversifying this exposure can help to produce a less volatile and more stable income return.

"Broad bond markets in the US and UK are carrying significant duration risk so emerging markets looks like a genuinely good alternative.

"This fund selects largely investment grade bond issues so the default risk is heavily reduced and the yield is likely to be superior to most found in the majority of fixed income funds."

Duration risk is a bond market term for the risk that movements in interest rates will cause the price of a bond to fall.

david.thorpe@ft.com