Franklin Templeton Investments has held the soft launch of the FTIF Franklin K2 Long Short Credit Fund, a sub-fund of the Luxembourg-registered Franklin Templeton Investment Funds (FTIF) SICAV range.
This is the third liquid alternatives offering made available in the FTIF range, closely following the launch of the Franklin K2 Global Macro Opportunities Fund last month.
Luxembourg-based investors will be able to access the new fund from 16 December 2016.
The multi-manager fund seeks total return over a full market cycle through a combination of current income, capital preservation and capital appreciation, while providing daily liquidity and a flat management fee. The fund will allocate its net assets across a variety of strategies including alternative fixed income and credit strategies. These will be sub-advised by hedged fixed income managers, selected by the fund’s investment management team, consisting of David Saunders, founding managing director, Rob Christian, senior managing director, Jeff Schmidt, managing director of portfolio construction and Charmaine Chin, managing director at K2 Advisors.
Saunders (pictured) says: “We are excited to introduce this fund as it provides retail investors access to a liquid, actively-managed alternative fixed income investment strategy that seeks to generate lower correlated sources of total return compared to traditional, long only fixed income investment options. The combination of our active management and line-up of alternative credit managers is meaningfully differentiated in the marketplace. The fund uses a diverse toolkit to identify and manage both risks and opportunities across multiple sectors, geographies, instrument types and long/short exposures. We believe that investors may be open to alternatives as a way to diversify their portfolios outside of traditional fixed income investment options.
“Hedged fixed income strategies typically attempt to generate profits by exploiting inefficiencies and price differentials between fixed income and related securities, through long and/or short positions. Volatility may be further dampened through the hedging of exposure to factors such as duration, market risk, issuer-specific risk or interest rate risk”
Chin adds: “The multi-manager approach will allocate the fund’s assets to varying sub-advisors that cover three core, but diverse areas of the credit market; credit long/short, structured credit and emerging market fixed income. This means investors can access a wide range of the fixed income and credit markets through a single diversified portfolio.”
The sub-advisers have been selected through K2’s proprietary due diligence process. K2 Advisors will continually adjust allocations to the sub-advisers to reflect the team’s top-down views on where they believe opportunities and risks exist, while taking into account market conditions, risk factors, diversification, liquidity and transparency.
Vivek Kudva, managing director, EMEA and India at Franklin Templeton Investments, says: “Investors today are challenged with increased market volatility and low levels of global growth. This means achieving decent returns within a reasonable level of risk can be difficult. Our liquid alternatives range of funds is designed to meet the rising demand we are seeing from investors for solutions that help navigate these challenges. These strategies offer investors access to a varied pool of superior hedged fund managers, experienced in seeking attractive risk adjusted returns with managed volatility, but through a liquid UCITS structure. This is now the third liquid alternatives fund we have launched in our FTIF range, demonstrating the success of our partnership with K2 Advisors, since Franklin Templeton acquired the firm in 2012.”
The Franklin K2 Long Short Credit Fund plans to use underlying sub-advisers across the strategies to invest in a wide range of fixed income securities such as corporate bonds, corporate loans, asset-backed securities, sovereign bonds, convertible securities and stocks. The strategy may also use interest rate swaps, derivatives, futures, ETFs and indices, among other instruments.
The planned line-up of sub-advisers at public launch will include: Apollo SA Management (credit long/short); Chatham Asset Management (credit long/short); Candlewood Investment Group (structured credit); Ellington Global Asset Management (structured credit); and EMSO Asset Management (emerging market fixed income).