Markets

Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

The determination -- or stubbornness -- that pushed Michael Hasenstab to the peak of Everest is intact. However, Franklin Templeton's star bond fund manager is starting to become more sensitive to approaching danger. At least, that's the signal sent by a sudden shift in one of the funds he oversees.

The central bank of Mongolia raised its key interest rate to 15 percent from 10.5 percent on Thursday, a week after Finance Minister Choijilsuren Battogtokh set up a task force to deal with a cocktail of slowing growth, a weakening currency and a soaring budget deficit. Choijilsuren's warning that Mongolia faced a "deep state of economic crisis" had sent the nation's dollar 2022 bonds tumbling 6.3 percent, a loss they have since recovered.

Rough Ride
Mongolian bonds were already volatile but they have gone amok in the past week amid emergency measures by the government
Source: Bloomberg

A year ago, those moves would have wreaked havoc on the assets of Franklin Templeton's Asian Bond Fund, one of many managed by Hasenstab. At that time, the portfolio had $122.5 million in Mongolian bonds, one of its biggest holdings. The position has been reduced since by more than 80 percent to $22.8 million, with the bulk of sales occurring in the second quarter, filings show.

Steady, Steady, Go
A year ago, the single biggest holding of the Templeton Asian Bond Fund was one Mongolian note
Sources: Fund filings; Bloomberg

That's a big change for a fund manager who's been known for sticking to his bets, sometimes to the bitter end. With Mongolia, Hasenstab had already ridden out some rough patches and even used them as opportunities to add to his position. That strategy worked with Irish bonds in the European crisis but backfired in war-torn Ukraine.

This time, it seems, Hasenstab isn't sticking around to see how bad things can get. Any good trader will tell you that's a sign of wisdom. Even a contrarian has to know when to follow the herd.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Christopher Langner in Singapore at clangner@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net