Franklin Pelagos Commodities Strategy Fund

Fund Description

The fund seeks long-term total return by investing in commodity-linked derivative instruments, U.S. government / agency securities and other fixed income securities. By investing in commodity-linked derivative instruments, the fund seeks to gain exposure to the returns of real assets trading in the commodities markets without direct investment in physical commodities. Real assets include metals, gas, oil, livestock, agricultural or meat products and other items.

Strategy Statement

"We believe the commodity markets are supported by population increases, economic expansion, urbanization trends and supply-side dynamics."

Stephen P. Burke

Management

Stephen P. Burke

Stephen P. Burke

  • Joined Franklin Templeton in 2005
  • Managed Fund Since 2011
John C. Pickart, CFA

John C. Pickart, CFA®

  • Joined Franklin Templeton in 2005
  • Managed Fund Since 2011

Rating

Overall Morningstar Rating As of 03/31/2018

Rating Category: Commodities Broad Basket

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 As of 03/31/2018

Years Ratings Funds
in category
3
3 Stars
109
5
3 Stars
87
10
Stars

Morningstar Style Box

We do not publish a style box for this fund.

Strategy, Benefits, Results

Strategy

  • The derivatives market is a relatively efficient way to gain commodities exposure, without taking on the costs and logistical challenges of direct commodities investments.
  • Portfolio managers identify investment opportunities through a combination of top-down analysis of global growth and financial trends and bottom-up research on the commodities market, including supply, demand, price, momentum and seasonal dynamics.
  • The managers seeks to add value relative to the fund’s benchmark through their portfolio construction decisions regarding sector allocations, individual commodities, spot versus futures prices and seasonal issues.
  • To help manage volatility and satisfy asset coverage requirements, the portfolio managers also invest in securities of the U.S. government, its agencies and instrumentalities and other fixed income securities.

Benefits

  • Diversification. With its focus on commodities, the fund may help further diversify portfolios heavily weighted in stocks and bonds.
  • Inflation Protection Potential. An allocation to the fund may help a portfolio preserve purchasing power when inflation rises. Commodities, particularly food and energy, historically have represented a significant portion of the Consumer Price Index (CPI), one of the leading indicators for the U.S. inflation rate.i
  • Growth Potential. The fund provides access to a market with attractive growth potential. As populations grow and economies expand, notably in Asia and Africa, we believe demand for commodities may follow.
  • Experienced Management. The fund’s portfolio managers have over 60 years of combined industry experience, with extensive backgrounds in commodities and asset allocation.

Investing In The Fund

What Are the Risks?

  • All investments involve risks, including possible loss of principal.
  • Investing in physical commodities, either directly or through derivative instruments such as commodity-linked total return swaps, commodity futures, commodity index futures and options on commodity futures and commodities index futures, presents unique risks, is speculative and can be extremely volatile.
  • Market prices of commodities may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships; weather; agriculture; trade; domestic and foreign political and economic events and policies; diseases; pestilence; technological developments; currency exchange rate fluctuations; and monetary and other governmental policies, action and inaction.
  • Derivative instruments involve costs and can create leverage in the fund’s portfolio, which may result in significant volatility and cause the fund to participate in losses (as well as gains) in an amount that significantly exceeds the fund’s initial investment.
  • The fund may not achieve the anticipated benefits and may realize losses, which could be significant.
  • Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the fund adjust to a rise in interest rates, the fund’s share price may decline.
  • Foreign investing carries additional risks such as currency and market volatility and political, social and economic instability, risks which are heightened in less developed or emerging market countries.
  • These and other risks are described more fully in the fund’s prospectus.

Minimum Investment

See Prospectus

How Financial Advisors Help You

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