Building a balanced, resilient portfolio: How a multi-asset strategy turns market challenges into opportunities
Amid ongoing global economic volatility, Franklin Templeton aims to offer investors the flexibility to mitigate risks while pursuing both income and growth
Charlotte Kng YT
THE freefall in global stock markets on Aug 5 was a stark reminder of just how fast market sentiment can change.
What began as worries over the global economy and higher Japanese interest rates turned into a massive sell-off, with investors rushing to offload risky assets.
While markets have since recovered, investors continue to face uncertainty on various fronts. Whether it is ongoing conflict in the Middle East and Ukraine, the pace of interest rate cuts, or the upcoming US presidential election, there is plenty to keep investors on edge.
During such volatile periods, having a robust investment strategy that spreads risk across various asset classes matters more than ever. Franklin Templeton, one of the world’s largest asset managers and a pioneer in income investing, has employed its proven multi-asset strategy for over 75 years.
With US$1.6 trillion (S$2.1 trillion) of assets under management as of June 30, 20241, Franklin Templeton’s global team of over 1,500 investment professionals boasts a track record of delivering consistent returns through the booms and busts of market cycles.
By investing in a variety of asset classes, such as equities, fixed income and convertible securities, the firm’s flagship multi-asset strategy aims to reduce the overall risk of its portfolio, while also taking advantage of opportunities that arise. This, in turn, helps to create a more balanced and resilient portfolio.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Says Ed Perks, chief investment officer of Franklin Income Investors: “A key aspect of the strategy is balancing income with the potential for capital appreciation, which has been, for decades, a hallmark of the fund we manage.”
Franklin Income Investors is one of its investment teams within Franklin Templeton, specializing in income strategies.
Although diversification is a basic rule of good investing, Franklin Templeton’s proprietary approach to actively managing its funds has typically produced superior results, particularly in the years after a market downturn.
Moving with the market
A key strength of Franklin Templeton’s approach is how quickly it can adapt to changing market conditions. When interest rates are low, for instance, Franklin Income Investors has the flexibility to shift towards higher-yielding assets like dividend-paying stocks or high-yield bonds to increase income potential. On the other hand, when the economy is in a slump, the team might allocate more fixed-income to the portfolio to preserve capital.
In March 2020, for instance, when a sell-off in equities presented compelling buying opportunities in certain sectors and companies, Franklin Income Investors responded swiftly by increasing the strategy’s overall allocation to equities.
Such a dynamic approach is key to the firm’s ability to manage risk, while ensuring the portfolio stays on track to meet income and capital appreciation targets.
This requires the investment team to actively manage its portfolios by continuously monitoring global economic trends and adjusting the portfolio in response to the latest market conditions. “Our approach allows us to mitigate the risks from market volatility while also positioning the portfolio to benefit from emerging opportunities in various asset classes,” says Perks.
A deep bench
At the heart of Franklin Templeton’s multi-asset strategy is a group of seasoned experts who have managed portfolios through numerous market challenges, from financial crises to economic downturns. As a global organisation, the firm’s investment professionals are based in 25 countries, serving clients from over 150 markets.
What truly sets this team apart from others is its flexible and dynamic investment approach. Its flexibility allows the team to pivot and adjust asset allocation swiftly in response to volatile markets, like the one in August this year, ensuring they can capture opportunities.
Says Perks: “The ability to invest across a broad range of asset classes, including equities, fixed income, and hybrid securities, allows the fund to adapt to varying market conditions while maintaining a focus on income generation.”
Footnote:
1Source: Franklin Templeton. As of June 30, 2024.
Disclaimers:
What are the key risks? The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund invests mainly in a diversified portfolio of U.S. equity, equity-related and debt securities. Such securities have historically been subject to price movements that may occur suddenly due to equity market- and bond market-specific factors. As a result, the performance of the Fund can fluctuate considerably over time. The Fund may distribute income gross of expenses. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital. Other significant risks include: credit risk, foreign currency risk. For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
This advertisement is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. This advertisement may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
Any research and analysis contained in this advertisement has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. Any views expressed are the views of the fund manager as of the date of this document and do not constitute investment advice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole.
There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein.
The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance.
Copyright 2024 Franklin Templeton. All rights reserved.
Issued by Templeton Asset Management Ltd, Registration Number (UEN) 199205211E.
Copyright SPH Media. All rights reserved.
