Franklin Templeton launches absolute return bond fund

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Franklin Templeton has launched a new Luxembourg-based bond fund to navigate market risks and the declining interest rate environment in Europe.

The Franklin Alpha Bond Fund seeks to provide attractive absolute returns through a combination of income and capital appreciation in excess of the Libor 90 day rate over a full market cycle.

The fund, launched on 18 March, will be managed by Michael Materasso, senior vice president and co-chair of the Franklin Templeton fixed income policy committee, and David Yuen, senior vice president and director of quantitative strategy and risk management for the Franklin Templeton fixed income team. The US-based pair have a combined 72-years’ experience.

The fund will be available to UK investors in April, subject to FCA approval.

“Given the current declining interest rate environment in Europe and the general increased market risk, there has been a rapidly growing demand for an alternative to traditional core fixed income mandates that don’t rely solely on interest rate movements for performance,” says Materasso.

“We believe the newly-launched Franklin Flexible Alpha Bond Fund may provide a more flexible, diversified, risk-managed solution to mitigate downside volatility.”

The fund’s portfolio managers will invest across countries, sectors, quality, maturity or duration, and without reference to a benchmark index. Franklin Templeton said it would use both a top-down bottom-up approach to investing.

“We take an unconstrained investment approach with dynamic sector rotation, between traditional and non-traditional sectors,” said Yuen.

“The strategy tactically uses active currency management, global rate exposure and relative value positioning, while aiming to manage various risks, such as duration.”