Fixed Income Funds

What is a Fixed Income Fund?

A fixed income fund typically invests primarily in bonds or other debt securities. Fixed income funds generally seek to pay a distribution on a fixed schedule, though the payment amount is not guaranteed, may vary, and may be zero. Investors may consider this type of fund for its potential for income generation and capital preservation.

Types Of Fixed Income Funds

There are a number of different types of income-producing funds, each with its own characteristics and level of risk.

Government

These funds typically invest in bonds issued by sovereign governments and government agencies authorized to issue debt, such as Fannie Mae and Freddie Mac, and international agencies, such as the World Bank and International Monetary Fund.

Municipal Bonds

Municipal bonds are issued by state and local governments in the U.S. in addition to other public authorities, such as school districts. Generally speaking, interest on municipal bonds is exempt from federal income taxes. In some states, interest on bonds issued by that state and the municipalities within it are also exempt from that state’s income taxes.

Corporate Credit

These funds typically invest in bonds, preferred stocks, and other types of fixed-income instruments representing debt issued by private corporations. Corporate bonds tend to be more risky than bonds issued by governments and carry various credit risks depending on the individual issuer. As a result, however, they may offer potentially higher income opportunities.

Multi-Sector

These funds typically invest in a variety of fixed-income instruments, including a mix of government and corporate bonds. This provides investors with an additional level of diversification across both credit risk and price.

Securitized

Asset-backed securities are collateralized by loans that provide an income stream comprised of both principal and interest on the securities. Loans backing these securities include residential and commercial mortgages, automobile loans, credit cards, and other types of financial assets.

Bank Loans

These represent participation in loans to private corporations underwritten by commercial banks, including first lien, second lien, and collateralized loan obligations. Bank loans tend to be more risky than corporate bonds but, as a result, can potentially offer higher interest rates.

Currencies

These funds typically invest in money market instruments and forward currency contracts denominated in the currencies of foreign countries. In addition to carrying credit risk, these funds carry currency fluctuation risk.

Sukuk

Sukuk funds are vehicles that typically invest in debt instruments structured to comply with Islamic law and its investment principles. Historically, sukuk bonds offer less volatility and more downside protection than conventional bonds. They have also grown in size and diversity over the past several years.

Our Approach

We believe global fixed income markets are inefficient. In our view, the best way to seek to exploit these inefficiencies is through a sector-by-sector research-oriented approach, which is integrated globally. We offer investors a wide range of strategies covering benchmark-aware and unconstrained to tailor portfolios that seek to meet a diverse set of client needs.

Emphasize Independent Research
We focus on sectors where we believe our independent research offers the greatest opportunities to add value for our clients.
Utilize Multiple Research Perspectives
We believe fixed income portfolios can best be managed by integrating three perspectives: top-down macro analysis, bottom-up sector analysis and quantitative insights to guide strategy allocations.
Commit to the Long Term
We take a long-term view for all we do, from the people we hire, to the markets we enter, to the solutions we offer and to the investment decisions we make.

WHAT IS FIXED INCOME COMPARED TO BOND FUNDS?

Fixed income typically refers to a type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule.

Investors traditionally equate bonds with fixed income however there are various types of fixed income instruments including preferred securities, treasury bills, certificates of deposit, guaranteed investment certificates, and mortgage backed securities.

In comparison, bond mutual funds invest primarily in individual bonds. Typically they make periodic dividend payments based on the interest paid by the bonds held in the fund.

FEATURED FRANKLIN TEMPLETON FIXED INCOME FUNDS

TGBAX

(Advisor)

Seeks current income with capital appreciation and growth of income by investing primarily in government bonds, including government related entities and agencies located anywhere in the world. The fund regularly uses various currency-related and derivative instruments.

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Seeks to provide a high level of current income exempt from federal income taxes.

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Seeks to provide a high level of current income by investing primarily in U.S. and foreign debt securities.

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Seeks to provide a high level of current income by investing primarily in floating rate senior secured loans (floating rate loans) and corporate debt securities.

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Seeks to provide a high level of current income, while providing lower volatility than a fund that invests in fixed-rate securities. Primarily invested in adjustable-rate mortgage securities (ARMS) that are issued or guaranteed by the U.S. government, its agencies or instrumentalities.


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See all Franklin Templeton fixed income funds.

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