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Rating:Stock Analysts and Shareholders Watch for a Turnaround in Hasentab's Fund
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Wednesday, December 14, 2011

Stock Analysts and Shareholders Watch for a Turnaround in Hasentab's Fund

News summary by MFWire's editors

The worm may be turning with investors in one of the top selling bond mutual funds that is now seeing its first outflows in three years, reports Bloomberg. Franklin Resources [profile] Templeton Global Bond shareholders have redeemed a net $487 million from the Michael Hasenstab-managed mutual fund in November.

Those outflows are also causing some stock analysts to think twice about recommending Franklin Resources' shares.

The outflows from Global Bond represent less than one percent of the mutual fund's $61 billion in AUM. Yet, the trend is important to Franklin as the fund itself represents about nine percent of Franklin's has $675.8 billion in AUM.

During the first ten months of the year, the mutual fund had been a driver of growth at Franklin, attracting $15 billion net deposits.

Stock analyst Michael Kim of the Sandler O'Neill & Partners LP told Bloomberg that the fund "has been the biggest driver of their growth for some time." He added that, "It is going to take better performance and a better market backdrop to turn the flows around."

Ticonderoga Securities analyst Douglas Sipkin and JPMorgan Chase & Co. analyst Kenneth Worthington both lowered their rating on Franklin in recent months. Sipkin cut his to "neutral" from "buy" while Worthington's slipped to "underweight" from "neutral."

The redemptions are a reaction to the mutual fund's performance and not evidence that shareholders are losing faith in bonds. Global Bond has lagged 92 percent of its peers through December 12 with a loss of 2.6 percent. During the five years leading up to November the fund had topped 98 percent of its peers.

Hasenstab himself wrote on Franklin's website to explain that the "temporary panic and contagion as opposed to fundamental problems" resulted to a weakening in the emerging-market currencies against the U.S. dollar which in effect caused the fund's troubles. 

Edited by: HFD


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