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Franklin Global Growth Fund - News
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Franklin Global Growth - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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For the quarter ended 31 March 2011, FTIF Franklin Global Growth Fund returned net 4.24% (in U.S. dollars), slightly underperforming its benchmark, the MSCI World Index, which returned 4.91% (also in U.S. dollars).
Market Review
Global equity markets moved slightly higher in the first quarter of 2011 in spite of a variety of global macro-events, including political unrest in the Middle East and North Africa (MENA) region and natural disasters in Japan. While the broad market indexes, including the MSCI World Index and MSCI EAFE Index, rose over the period, underlying returns were actually heavily concentrated in stocks within the energy sector. Conversely, the Japanese market posted a negative return for the quarter as the country struggled to gain control of radiation leaks from a nuclear plant and deal with the aftereffects of a devastating earthquake and tsunami. Broadly, we saw a brief spike in global market volatility in March given the abundance of macroeconomic factors; however, by the end of the month, volatility had returned to relatively normal levels as the market re-focused on the continued global economic recovery.
Performance Review and Contributors to Performance
Relative performance across fund sectors was mixed during the first quarter of 2011, though the fund only slightly underperformed its benchmark index. While broad-based stock selection remains the foundation of our approach, it weighed against relative results overall for the first quarter. Selections that contributed positively to overall portfolio performance for the quarter included holdings in the information technology, consumer discretionary, materials and health care sectors.
Within the information technology sector, a position in online commerce company MercadoLibre Inc. supported returns as the company experienced strength in multiple areas including robust revenue growth, earnings-per-share growth, compelling growth in net income, and a notable return on equity. Other information technology contributors included design software and services company Autodesk Inc. and enterprise data integration software provider Informatica Corp. benefited portfolio results.
Within the consumer discretionary sector, positions in online travel company priceline.com Inc. and international media business Pearson PLC also helped relative fund performance. Shares of Pearson PLC were bid up as it raised its earnings guidance three times and in February reported a sharp rise in full-year profits as it benefited from its extensive education and publishing operations. Among materials holdings, a position in agribusiness Syngenta AG positively impacted performance.
In the health care sector, a position in medical technology company Getinge AB lifted returns. Elsewhere, a position in WorleyParsons Ltd., a provider of professional services to the resources and energy sectors and process industries, boosted relative results within the energy sector. Furthermore, a position in international financial marketplace operator Deutsche Boerse AG assisted fund performance within the financials sector.
In contrast, a position in London-based investment management company Man Group PLC negatively impacted results in the financials sector. Shares in the company fell through the period following its announcement that it sold its stake in a rival hedge fund manager as it focuses on organic growth after a recent acquisition. Elsewhere in financials, positions in investment holding company Hang Lung Properties Ltd., private motor insurance company Admiral Group PLC and investment services firm Macquarie Group Ltd proved adverse.
n the consumer staples sector, a position in Hengan International Group Co. Ltd., a Chinese company that is a market leader in personal hygiene products, weighed on performance. Additionally, in the consumer staples sector, positions in household and health care products manufacturer Reckitt Benckiser Group PLC and international retailer Tesco PLC also weakened relative returns.
A position in consumer products exporter Li & Fung Ltd. also hampered returns, as did a position in health care products company Terumo Corp.
On a regional basis, the fund held the majority of its investments in Europe, the U.S. and Asia. In Asia, the fund was overweighted in Australia and Hong Kong relative to the benchmark. In Europe, the fund's largest overweighting compared to the benchmark was in Switzerland. In contrast, the fund was significantly underweighted in the U.S. versus the benchmark.
Outlook
As we look out into 2011, we believe markets should remain somewhat positive in the face of continued improvements in the global economy. We do acknowledge, however, that many investors remain nervous and seem to be waiting for the next macroeconomic shoe to drop, a sentiment that could potentially hold markets back in the near term. As always, we remain focused on company fundamentals, looking for sustainable business models supported by strong free cash flow and responsible management.
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Franklin Global Growth - Jun 10
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Wednesday, 25 August 2010
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Fund Manager Comment
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For the quarter ended 30 June 2010, FTIF Franklin Global Growth Fund returned net -12.52% in U.S. dollars, slightly underperforming its benchmark, the MSCI World Index, which returned -12.49%, also in dollars.
Market Review
Enveloped by Europe's sovereign debt crisis, world equities fell heavily during the second quarter of 2010. Confidence in a sustained global economic recovery deteriorated further on China's efforts in moderating growth and a worldwide slowdown in manufacturing activity. By quarter-end, most major stock markets were deep in negative territory. Emerging markets performed better than developed markets, as Europe suffered the largest quarterly equity loss compared with Asia, the U.S. and Latin America.
The European sovereign debt crisis gained momentum during the quarter as austerity measures of teetering economies dominated headlines. Europe's rescue loan for Greece, as well as its government debt purchases and stabilization fund for other fiscally strained countries such as Spain, Portugal, Ireland and Italy, failed to inspire global confidence. Greece, Romania and Hungary suffered the biggest equity selloffs, as many countries ran into roadblocks trying to push through unpopular spending cuts and adhere to deficit limits set by the European Union and International Monetary Fund. Some investors worried about possible effects of such tough fiscal medicine and feared Europe would need a long time to recover from its homegrown quagmire. The health of eurozone banks was again called into question with the failure of a small Spanish bank, and consequently, the European Central Bank agreed to widen and publish results of its bank stress tests in July.
Performance Review and Contributors to Performance
While broad-based stock selection remains the foundation of our approach, it was not beneficial to performance during the period. A "flight to quality" during the period resulted in stronger performance for the U.S. and Japanese markets. While regional weightings had a more significant impact on performance for the quarter, we believe that over the long term selective stock picking should drive results.
Relative performance across sectors of the fund was mixed for the second quarter of 2010, with pressure coming from stock selection in consumer discretionary and health care, along with a somewhat detrimental underweighting in consumer staples. Individual holdings in the financials, industrials and telecommunication services sectors helped returns.
Within the financials sector, positions in Man Group PLC and United Overseas Bank Ltd. added to performance. Man Group, a London-based investment management company, benefited from continued moderation in institutional redemptions and improved performance of its AHL strategy. Shares of Singapore-based United Overseas Bank were also helped by the fast-paced, growing Asian region, and the bank is quietly confident that they will see high single-digit loan growth for the year, driven by both mortgages and small to medium-sized enterprises. Singapore has seen a fairly strong gross domestic product (GDP) rebound, which should benefit loan growth over the rest of 2010.
Within industrials, a position in MTU Aero Engines Holding AG, a Germany-based company engaged in the design, development and manufacture of engine modules and components, helped performance. The company reported slightly better-than-expected net profits for the first quarter in April.
Within the telecommunication services sector, shares of American Tower Corp., a wireless and broadcast telecommunications infrastructure company, benefited from the increased demand for additional bandwidth that has come with the development in smartphone technologies.
In contrast, positions in several health care-related stocks, including Gilead Sciences Inc., negatively impacted results. Shares of Gilead Sciences were affected by developments in Europe as governments cut prices on a variety of health care-related expenditures. Although this was expected by the market and considered in our longer-term analysis, the news flow impacted returns for the quarter. A provider of hospital equipment also detracted from results.
Within consumer discretionary, a position in Esprit Holdings Ltd., which is engaged in wholesale and retail distribution and licensing of fashion and life-style products, was negatively impacted by its exposure to European markets, as a significant portion of its business is derived from the region. Ongoing concerns about the trajectory of the economic recovery in Europe weighed on returns. Additionally, investors re-assessed the strength and timing of the company's wholesale sales recovery and performance of company-owned stores, factoring in a negative margin impact from ongoing company deleveraging and higher overall input costs. In addition, a position in Urbi Desarrollos Urbanos S.A. de C.V., a Mexico-based home developer, negatively impacted results.
On a regional basis, the fund had the majority of its investments in Asia, North America and Europe. In Asia, the fund was overweighted in Australia and Hong Kong relative to the benchmark. In Europe, the fund's largest overweighting compared to the benchmark was in Switzerland. In North America, the fund was significantly underweighted in the U.S. versus the benchmark.
Outlook
As we have mentioned in prior communications, the breadth and depth of economic, monetary and fiscal issues that need to be sorted out by various governments and central banks are, given their global nature, historically unprecedented. It is clear to us that over the next few years we will need to see continued deleveraging by governments and consumers. The result of this is likely to be muted overall economic growth. However, as markets work their way through the issues, we anticipate that there should be continued opportunities for companies to innovate and/or take market share. Our focus remains on those companies that we believe have sustainable business models and the necessary foresight to navigate the mixed economic environment likely to be seen in the next few years. We believe that companies generating strong cash flow and that can re-invest successfully could potentially be able to grow and/or take market share through most market environments.
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