Fund Description

The fund seeks to provide high current income consistent with preservation of capital. Capital appreciation over the long term is a secondary goal. The fund invests at least 80% of its assets in investment grade debt securities and investment and focuses on government and corporate debt securities and mortgage- and asset-backed securities.

Strategy Statement

"The fund was created to be a core fixed income holding, offering diversification across the fixed income universe and backed by the expertise of a world-class team of fixed income professionals."

Management

Sonal Desai, Ph.D

Sonal Desai, Ph.D

  • Joined Franklin Templeton in 2009
  • Managed Fund Since 2018
Tina Chou

Tina Chou

  • Joined Franklin Templeton in 2004
  • Managed Fund Since 2019
David Yuen, CFA

David Yuen, CFA®

  • Joined Franklin Templeton in 1988
  • Managed Fund Since 2005
Patrick A. Klein, Ph.D

Patrick A. Klein, Ph.D

  • Joined Franklin Templeton in 2005
  • Managed Fund Since 2019

INVESTMENT PHILOSOPHY, STRATEGY AND APPROACH

Investment Philosophy

Franklin Templeton Fixed Income believes that integrating top-down macroeconomic views, bottom up fundamental research, and quantitative science provides us with a competitive edge to navigate challenging investment environments, pursue consistent alpha, and better serve our clients.

Investment Process

Our investment process marries independently-derived macroeconomic and fundamental sector-specific research with quantitative insights.

Research

The Quarterly Research and Strategy Forum is the starting point for our investment process. Investment teams present and debate independently derived macro, fundamental, and quantitative research, establishing key investment themes.

Individual sector teams dedicated to global sovereigns, corporate credit, securitized debt, and municipal bonds are responsible for preparing and presenting independent research which culminates in a fundamentals-driven outlook and recommendation for their sectors.

Investment Themes

Our proprietary model provides unbiased forecast of spreads in each sector. Applying economic forecasts and machine learning, the model maps this forecast to an historic economic regime/environment considering how spreads in different sectors have behaved.

We perform a reconciliation between the macro views, quantitative input, fundamental views, and cross sector considerations to arrive at high conviction spread forecasts across all sectors.

Comparing expected spreads with prevailing market spreads identifies which sectors look expensive relative to our forecast ‘fair value’ and which sectors have more promising relative value and expected return.

The goal of this process is to provide the investment team with a high conviction view of expected spreads, to aid in the portfolio optimizing process.

Portfolio Construction and Implementation

We use a sophisticated portfolio optimization in our aim to maximize expected excess return for a given level of risk. Sector allocation, coupled with our top-down macro views, drive the final allocations for each strategy.

We conduct a ‘neighborhood analysis’ to determine optimal allocation bands. This process seeks to ensure that risk is efficiently allocated to our highest conviction views in a way that is consistent, repeatable, and designed for accountability.

Each sector allocation is then populated with the highest conviction securities of each sector team. This process brings together factor-based quantitative security rankings and active fundamental credit recommendations into prioritized, potential buy and sell lists at the security level.

Material environmental, social, and governance (ESG) issues are an integral component of our bottom-up research and risk/return forecasts. Analysts have access to multiple ESG data sources to help build a qualitative view of each issuer and security.

Risk Management

Throughout the portfolio construction process, portfolio managers collaborate with our independent Investment Risk Management Group, using a mosaic of risk metrics, to monitor and evaluate the level and sources of risk in each portfolio, and to ensure the allocation of risk is commensurate with the forward-looking views of the investment team, level of conviction, and the portfolio’s investment objectives and guidelines.

Rating

Overall Morningstar Rating As of 08/31/2020

Rating Category: Intermediate Core-Plus Bond

Morningstar
The fund's overall Morningstar Rating measures risk-adjusted returns and is derived from a weighted average of the performance figures associated with its 3-, 5- and 10-year (if applicable) rating metrics.

Historical Morningstar Rating [further-information] As of 08/31/2020

Years Ratings Funds
in category
3
2 Stars
533
5
2 Stars
458
10
3 Stars
340

Morningstar Style Box As of07/31/2020

Strategy, Benefits, Results

Strategy

  • Our multi-sector, fixed-income fund focuses on government and corporate debt securities, as well as mortgage- and asset-backed securities.
  • Our research-driven, value-oriented approach identifies bonds with the best prospects for income and capital appreciation.
  • We provide in-depth, fundamental analysis of each of the key fixed-income sectors within the context of a global economic outlook.

Benefits

  • Diversification. Broad diversification makes our fund attractive as a core fixed-income holding.
  • Global Fixed Income Expertise. Investors have full access to the research resources of the Franklin Templeton Fixed Income Group®.