Summary: If you are going to own a world bond fund, the Templeton Global Bond Fund (TPINX) is the one to own. This fund has an outstanding historical performance and is positioned to do well even if interest rates rise.
Commentary: This fund will add diversification to any portfolio. Only 40% of the debt the fund holds is denominated in US dollars. However, funds that don’t hold US denominated debt tend to hold Japanese yen or euro debt. Not this fund. Do you want exposure to the Korean won? This fund’s top holding is a Korean issue. How about the Polish zsolty or Hungarian Forint? Got it.
The Templeton Global Bond Fund takes active market views. Right now, the fund is very nervous about interest rates rising and has shortened the duration of its holding to 1.6 years. If the loose monetary policy (keeping the printing presses busy) of the FED, ECB and China leads to inflation, the fund is well positioned. If not, the fund still pays a respectable yield of more than 2.0%.
You are going to pay a big sales load to get into this fund. In exchange, you will get the best world bond portfolio manager, Michael Hasenstab, to manage your money. Bottom line, don’t invest unless you can commit to this fund for at least 5 years, otherwise paying the load does not make sense.
Short-Term Performance: Excellent The Templeton Global Bond fund easily outperformed most world bond funds over the last 12 month and 3 years. However, the fund’s performance was choppy. In 2011, the fund lost money (-2.3%) when other world bond funds made money. For the last 3 years, the fund is up 8.4%.
Long-Term Performance: Excellent The 5 and 10 year total return are both around 10%. Enough said.
Risk Level Relative To Returns: Good The Templeton Global Bond Fund is going to give you a bumpy ride. The fund’s duration is super-short right now, however, that’s a reflection of Michael Hasenstab’s market view rather than a permanent characteristic of the fund. (you can learn more about duration here) While the interest rate risk is minimal for the moment, you have a tremendous amount of risk related to currency movements. However, in this case, currency risk could also be considered currency diversification.
Fees: Bad a 4.25% front end loan and almost 1% annual expense fee. You can learn more about bond fund fees here.
Manager Tenure: Excellent Since 2001, Michael Hasenstab has been at the helm. However, its looks like they are grooming Sonal Desai to eventually take over the fund.