On January 15, it was announced that Harlan Hodes would be replacing Martin Cobb as the lead portfolio manager on the fund. Mr. Cobb will remain with the firm, but as an analyst with responsibility for the chemical and materials sectors.
I see this as a positive. To be blunt, the fund struggled under Mr. Cobb’s leadership, who took over in early 2011 after the departure of long time manager Brad Radin. For the past three years, the fund gained an annualized 13.9%, significantly underperforming the 22.1% rise in the MSCI World Small Mid Cap Index.
I had been less than impressed with this fund for quite some time. I found that Mr. Cobb, at least in my opinion, took an exceptionally long time to transition the portfolio after he took over. Returns were below average, and volatility increased from the previous management team. It failed to keep pace in rising markets, and underperformed dramatically when they fell.
Mr. Hodes joined Templeton in 2001 and has been dedicated to small-cap equities, managing a number of small-cap products. In fact, prior to this change, Templeton says he was responsible for managing nearly 90% of all Templeton small cap assets.
It is expected that there will be no change to the investment philosophy, strategy or process of the fund because of this change. It will still be managed using a disciplined, multi step, value focused process and they are still selecting names from the same database of buy candidates.
My hope is that under Mr. Hodes’ leadership, the fund’s performance can turn around. While I am encouraged by the change, I will continue to monitor it, looking for signs of a turnaround.