Michael Hasenstab is heading for a two-week trip to Asia and Australia to explore the fixed-income and currencies markets there for San Mateo (Calif.)-based Franklin Templeton Funds. "I like to go, for both the meetings and the sense you get on the street, seeing construction and consumer activity," says the 32-year-old fund manager who has dual citizenship in the U.S. and Australia (from which his mother hails). "You certainly can get a feel for what's going on behind the numbers."
Indeed, Hasenstab's on-the-ground research has helped him steer the Templeton Global Bond Fund (TPINX) to a five-year annualized return of 11% for the 2001-05 period, nearly double that of his peers. His investing approach is to analyze each country separately to assess its interest rate and currency outlook, and if he likes it, to buy bonds in the local currency.
Hasenstab spreads his bets around the globe, since not all fixed-income markets move in the same direction. The fund holds government bonds of 32 nations, with South Korea, Poland, and Canada comprising the three largest holdings. In the 12 months ended in January, Canadian bonds were up 14%, Poland gained 9.5%, and South Korea rose 7.83% (the local market return plus currency changes).
According to Hasenstab, better investment opportunities can often be found outside of Japan, Europe, and the U.S. because those countries are so heavily represented in benchmarks like the Salomon Brothers Non-U.S. Dollar World Government Bond index. In fact, the Templeton fund doesn't even own any Japanese bonds, which have lagged due to weakness in the yen. Still, the fund is a big investor in Asia, with 42% of assets invested in securities in nations such as Thailand, Singapore, and South Korea.
This fixed-income manager has always had a keen interest in Asia. Hasenstab first joined Franklin Templeton in the summer of 1995, but took a leave of absence a few years later to pursue a PhD. in economics. For his dissertation, he focused on the development of China's debt and equity markets, and was awarded his doctorate in 2001 by the Asia Pacific School of Economics and Management at Australian National University. He has been running the Templeton Global Bond Fund since 2002, along with veteran manager Alex Calvo.
Not surprisingly, Hasenstab's favorite place to invest is Asia and Australia. The macroeconomic environment in the region (except Japan) is healthy, he says, fueled by strong exports, and growing consumption and investment trends that could help boost their currencies vs. the U.S. dollar. He won't be surprised to see even more evidence of this when he hits the streets.