Franklin Resources Inc. (BEN)’s Templeton Global Bond, this year’s best-selling mutual fund in the U.S., suffered its first month of redemptions in three years in November after performance lagged behind rivals.
Investors pulled $487 million from the $61 billion mutual fund managed by Michael Hasenstab, the first withdrawal since November 2008, according to Chicago-based Morningstar Inc. (MORN) The fund, which beat about 98 percent of its rivals over the past five years, attracted net deposits of $15 billion in the first 10 months of 2011, Morningstar data show.
“This fund clearly has been the biggest driver of their growth for some time,” Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York, said in a telephone interview. “It is going to take better performance and a better market backdrop to turn the flows around.”
Concerns that the fund’s slumping performance may hamper San Mateo, California-based Franklin’s ability to win investor cash have weighed on the stock. The shares climbed 0.3 percent from the end of September through yesterday, compared with a 10 percent gain for the Standard & Poor’s index of asset managers and custody banks.
Douglas Sipkin of Ticonderoga Securities in New York cut his rating on the stock to “neutral” from “buy” earlier this month. Kenneth Worthington, an analyst with JPMorgan Chase & Co. in New York, downgraded Franklin to “underweight” from “neutral” in October, according to data compiled by Bloomberg.
The fund fell 2.6 percent this year through Dec. 12, worse than 92 percent of its peers, Bloomberg data show. Matt Walsh, a spokesman for Franklin, didn’t respond to an e-mailed request for comment.
Hasenstab, in a September note posted on Franklin’s website, said the fund’s troubles were caused by weakness in emerging-market currencies against the U.S. dollar, a development he said was the result of “temporary panic and contagion as opposed to fundamental problems.”
In an October note, also on the website, Hasenstab repeated his longstanding view that the most attractive investments are bonds and currencies outside the U.S., the euro zone and Japan.
“We are finding a lot of opportunities in emerging markets, which are experiencing stronger growth,” he wrote.
Templeton Global Bond’s largest currency positions in the Asia-Pacific region were in the South Korean won, the Australian dollar and the Malaysian ringgit as of Aug. 31, according to a regulatory filing. All three have lost value in relation to the U.S. dollar since June 30 as Europe’s debt crisis has sparked a flight from riskier assets.
Franklin attracted $10.2 billion in bond deposits in the quarter ended Sept. 30 while its stock funds had redemptions of $6.9 billion, according to a company document. In the prior quarter, bond funds drew $20.1 billion in cash and stock funds saw withdrawals of $300 million.
Franklin managed $675.8 billion as of Nov. 30.
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