Franklin Templeton Investments
has launched the Franklin Target Return Fund, a fund aimed at achieving a specific return target within a certain volatility range through a multi-asset investment portfolio.
Rather than diversifying based on traditional asset class labels, the portfolio is managed based on so-called “asset behaviours” to aim to deliver the desired outcomes. Market opportunities are monitored and used to adjust the weightings among the three behaviours, which are:
- Growth – Investments with this behavioural theme are directly correlated to economic growth. These include equities and assets that typically have a positive correlation with equity markets, such as emerging market debt, high-yield bonds, commodities and infrastructure.
- Defensive – investments under this theme are typically negatively correlated to equity markets and tend to react positively to declines in real economic growth. These provide valuable protection against losses from major downturns. Examples include government bonds, gold, index-linked bonds, safe-haven currencies and hedging positions.
- Stable – this theme represents low to no correlation to equity markets. Stable investments aim for consistently higher returns than money markets by accepting modestly increased risks. Examples of these are market-neutral strategies, carry trades, relative value and risk premiums to isolate specific risk factors.
“We want to diversify the fund across a wide range of risk factors and ensure that one factor doesn't overly dominate the portfolio,” said Matthias Hoppe, senior vice president and portfolio manager, Franklin Templeton Multi-Asset Solutions. “That way we can achieve a broader diversification, which will help us mitigate risk.”
The Franklin Target Return Fund aims for a return of 4% net of fees over the FTSE TMX Canada 91-day T-Bill index over a rolling three-year period. The volatility range over the same three-year period is between 6% and 9%. Offered under National Instrument 81-104: Commodity Pools
, the fund will be registered-plan eligible.
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