Matthew Harrison

Franklin Templeton, one of the world’s largest investment managers, today announced that the Franklin Australian Absolute Return Bond Fund has passed a significant milestone, attracting $1 billion of funds under management from Australian investors.

Launched in December 2014, the Fund’s combination of attractive returns and strong risk management proved appealing to investors during the Covid-19 pandemic. Funds under management hit $500 million in July 2020 and then doubled in a period of ten months since then

Franklin Templeton Managing Director of Australia Fixed Income, Chris Siniakov, says the historically low rates in Australia and many parts of the world will continue to impact savers as economies recover from the Covid-19 pandemic.

“The current interest rate environment is here for some time and is creating challenges for investors seeking defensive returns without taking inappropriate risk,” notes Siniakov.

“The Fund fits in this niche, aiming to combine multiple lowly correlated alpha sources to deliver returns above the cash rate without overly relying on credit and yield based strategies.

The Fund is an actively managed portfolio of fixed income securities, designed to deliver defensive, stable returns through the interest rate and credit cycles while protecting against volatility through strong risk management. It is benchmarked against the Bloomberg AusBond Bank Bill Index.

Over the five-year period to April, the Fund has produced an average annual return of 3.44% (net of fees), versus a benchmark return of 1.36% per year over the same period. Absolute returns have been relatively consistent with positive performance nearly 90% of the time on a quarterly rolling basis.

Close to half the Fund’s investments are in investment-grade corporate bonds and close to 40% are in government securities. Currently, the Fund has no exposure to high-yield or riskier credit.

Matthew Harrison, Managing Director of Franklin Templeton Australia and New Zealand, says: “We are pleased with the momentum seen in this strategy and growth of the broader business in Australia. At Franklin Templeton, our whole focus is on delivering better outcomes for our clients and we are grateful for their ongoing support through a turbulent market environment.

“With cash yielding extremely low rates of return and increasing concerns about inflation, we’re hearing from many investors concerned about the erosion of their wealth in inflation-adjusted terms. They are looking for ways to generate real returns and consistent income streams, but some are concerned about the level of risk in the broad fixed income and equity markets,” notes Harrison.

“A defensive, absolute return approach to fixed income is proving attractive in this environment,” says Harrison.

The Fund has received ‘Recommended’ Ratings from both Zenith and Lonsec research houses and is available on most investment platforms.

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