| Fund Company | Franklin Templeton Investments |
| Fund Type | Global Equity |
| Rating | $$$ |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Philippe Brugere-Trelat since December 2009 Peter Langerman since December 2009 |
| MER | 2.77% |
| Code | TML 180 – Front End Units TML 182 – DSC Units TML 184 – Low Load Units |
| Minimum Investment | $500 |
Analysis: Since taking over the reins of this go anywhere global equity fund two years ago, Philippe Brugere-Trelat and Peter Langerman have continued to deliver strong relative results for investors. The team uses a bottom up, value focused security selection process which looks to identify companies that are trading at a discount of between 25% and 30% below their estimate of the company’s true worth. Not only must the companies be trading at a discount, there must also be a near term catalyst which will help to close the valuation gap, bringing gains to investors.
In addition to the traditional value focused stock selection approach, the fund can also invest up to 10% of the portfolio in more opportunistic strategies including covered call writing, merger arbitrage opportunities and distressed debt.
The team places a strong emphasis on managing risk within the portfolio. This is done by analyzing the potential downside for any stock in the portfolio. Further, the portfolio tends to be fairly well diversified, holding in excess of 100 names, with the top 10 making up less than 30% of the fund.
There is evidence that this focus on risk works. The volatility of this fund is among the lowest in the category. Since the fund was launched in Canada in 2003, the worst peak to trough loss has been 32%. In comparison, the MSCI World Index experienced a peak to trough decline of 43% during the same time period. While 2011 was the fund’s worst year since its Canadian launch, posting a 3.4% loss, it managed to outpace its peer group, finishing in the first quartile.
As of November 30, the fund was nearly fully invested, holding 3% in cash, 91% in equities, 5% in bonds and just under 2% in preferreds. Geographically, the fund is 48% in the U.S., followed by 15% in the UK. Direct exposure to the troubled Eurozone is approximately 24%.
The fund runs a bit on the pricey side, with an MER of 2.77%. In comparison, the category average is approximately 2.6%. Another thing investors should be aware of is that the fund is not for those who wish to follow a socially responsible investing approach, given it’s high weightings in tobacco companies.
While the trouble in the region is a concern, the manager’s investment process, with its focus on risk management and undervalued companies should help it to provide strong relative risk adjusted returns in volatile markets.