US-based group Franklin Templeton has decided to merge two fixed income funds to create greater economies of scale, Citywire has learned.
The total return fund, which was first launched on 29 August 2003, is managed by Citywire + rated duo, Roger Bayston and Kent Burns. The fund had $149 million in assets under management as at the end of November 2016.
In a letter to shareholders seen by Citywire, the company said the fund was ‘economically unattractive’ to run as an independent entity.
Over the three years to the end of December 2016, the fund returned 5.62%, this compares with a 9.37% rise by its Citywire-assigned benchmark, the Bloomberg Barclays US Aggregate Bond TR, over the same time period.
The receiving fund, the Franklin Strategic Income fund, which is also run by Bayston and Burns, as well as Chris Molumphy, had $1.8 billion in assets, as of the end of November 2016.
The fund was launched in July 2007 and is also domiciled in Luxembourg. This fund has the objective to earn a high level of current income.
Over the three years to the end of December 2016, the fund returned 2.24% in US dollar terms, this compares with a 2.50% fall, by its Citywire-assigned benchmark, the Citi WGBI TR USD over the same time period.
Commenting on the rationale behind the merger, a Franklin Templeton spokesperson said: ‘After careful consideration, the board of directors of Franklin Templeton Investment Funds range has decided to merge the Franklin US Total Return into the Franklin Strategic Income Fund effective April 21st.’
‘Both funds share similar investment objectives and investor profiles. Given the small size of the Franklin US Total Return Fund, the board believes that it is in the best interests of shareholders to merge these funds and focus on a single portfolio, which will offer economies of scale to existing shareholders of these funds.'
In the letter to shareholders, the company also said the increased flexibility of the receiving sub-fund will allow the investment management team a wider opportunity set to achieve the investment objectives.