Michael Hasenstab’s $59 billion Templeton Global Bond Fund, the best-selling mutual fund this year, declined 7.2 percent in the past month as Asian currencies slumped.
Templeton Global Bond Fund helped San Mateo, California- based Franklin Resources Inc. (BEN) quadruple its global bond assets since June 2009. The fund, which beat 98 percent of rivals over five years, is down 3.3 percent since the start of 2011, and it trailed 99 percent of peers this year through Sept. 22, according to data compiled by Bloomberg.
Franklin, which had $212 billion in global stocks and $197 in global bonds at the end of August, out of a total of $716 billion under management, fell the most in almost three years on Sept. 22 amid concern the fund’s recent performance may hurt earnings. Hasenstab said in a statement that the losses resulted from selloffs in currency markets caused by speculative investors and don’t reflect fundamental problems.
The decline in currencies such as the South Korean won and Australian dollar was the “result of temporary panic and contagion as opposed to fundamental problems,” Hasenstab said in a statement posted on the firm’s website.
Hasenstab, 38, invests mainly in bonds and currencies in countries with strong growth prospects and limited budget deficits. That philosophy, he wrote in a November regulatory filing, leads him to favor developing markets over developed ones. He holds no U.S. Treasuries or Japanese debt and his European holdings are concentrated in countries including Sweden, Norway and Poland, he said.
The Bloomberg-JPMorgan Asia Dollar Index fell to its lowest level of the year on Sept. 22, driven by concerns that Europe’s debt crisis and slowing growth around the world could lead to a global recession.
The fund had 41 percent of its assets in the Asia-Pacific region as of Feb. 28, according to a May regulatory filing. On the currency side, his largest positions in the region were in the won, with 15 percent, the Australian dollar, with 11 percent, and the Malaysian ringgit, with 9.4 percent.
In September, the won dropped 8.6 percent, the Australian dollar 8.7 percent percent and the ringgit 6.2 percent against the U.S. dollar, Bloomberg data show.
Hasenstab, who oversees $150 billion in investments for Franklin, said in an interview published on the Franklin website that Asian currency levels were not consistent “with long-term fundamentals,” and that he has been buying beaten-down currencies, without specifying which ones.
‘At the Bottom’
Hasenstab declined to comment, Matthew Walsh, a spokesman for Franklin said in an e-mail.
“Hasenstab has backed himself into a corner with currencies and he is living at the bottom of the pile,” Jeff Tjornehoj, an analyst at Denver-based Lipper, said in a telephone interview. Tjornehoj called Hasenstab a “very talented bond manager” and said the fund’s recent poor performance shouldn’t cause investors to lose faith in the manager.
In his interview on the website, Hasenstab said missing out on the rally in U.S. Treasuries has also hurt performance. The 10-year Treasury note gained 4.7 percent this month through Sept. 22 amid signs of weakness in the U.S. economy and the Federal Reserve’s Sept. 21 decision to buy $400 billion of long- term debt.
Treasuries, at current yields, are not attractive, Hasenstab said. The 10-year note yields 1.83 percent, Bloomberg data show.
Templeton Global Bond attracted $14.4 billion in the first eight months of 2011, more than any other U.S. mutual fund, according to data from Chicago-based Morningstar Inc. A $49 billion Luxembourg-based version of the fund won deposits of $5.9 billion through May, the most among long-term funds outside the U.S., according to New York-based researcher Strategic Insight.
A native of Buffalo, New York, Hasenstab holds a doctorate and a master’s degree in economics from Australian National University in Canberra, Australia. He has a bachelor’s degree from Carleton College in Northfield, Minnesota.
To contact the reporter on this story: Charles Stein in Boston at email@example.com
To contact the editor responsible for this story: Christian Baumgaertel at firstname.lastname@example.org