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Monday, November 18, 2013

Franklin Enters the Alts Space

Reported by Tommy Fernandez

The alts train, it is getting full.

Franklin is embracing the alts category with the Franklin K2 Alternative Strategies Fund (NASDAQ: FAAAX).

The fund will be managed by Franklin's alts arm, K2 Advisors, acquired in September 2012.

K2 Advisors will dynamically allocate assets across multiple managers and alternative strategies, including event driven, global macro, long short equity and relative valuei. K2 Advisors will continually adjust the allocations to these strategies to reflect the team's top-down market views with the goal of providing capital appreciation and lower volatility relative to the broad equity markets.

It will also feature, initially, the following sub advisors:
  • Basso Capital Management, L.P.
  • Chatham Asset Management, LLC
  • Chilton Investment Company, Inc.
  • Impala Asset Management LLC
  • Jennison Associates LLC
  • Lazard Asset Management LLC
  • Loomis Sayles & Company, L.P.
  • P. Schoenfeld Asset Management LLC
  • York Capital Management L.P.

    Franklin is only the latest example of a fund giant embracing alts. Other examples include AllianceBernstein;Invesco, GSAM, Fido.

    Here is the press release:
    Company Press Release

    Franklin Templeton and K2 Advisors Introduce Multi-Strategy Liquid Alternatives Fund for US Investors

    Diversified Offering Seeks Capital Appreciation With Lower Portfolio Volatility; '40 Act Fund Brings K2's Alternative Solutions Expertise and Relationships With Institutional Quality Hedge Fund Managers to US Retail Investors

    ? SAN MATEO, CA--(Nov 18, 2013) - Franklin Templeton Investments today announced the launch of its first multi-manager, multi-strategy mutual fund focused on alternative investment strategies, Franklin K2 Alternative Strategies Fund ("the Fund") (NASDAQ: FAAAX). Building upon Franklin Templeton's strategic acquisition of hedge fund solutions provider K2 Advisors in 2012, this US-registered Fund provides access to a diversified portfolio of alternative investment strategies managed by institutional-quality hedge fund managers. The Fund seeks to provide investors with lower correlations to traditional asset classes, reduced portfolio volatility and attractive risk-adjusted returns, while offering daily liquidity.

    As the Fund's investment manager, K2 Advisors will dynamically allocate assets across multiple managers and alternative strategies, including event driven, global macro, long short equity and relative valuei. K2 Advisors will continually adjust the allocations to these strategies to reflect the team's top-down market views with the goal of providing capital appreciation and lower volatility relative to the broad equity markets.

    "In today's volatile, low interest rate environment, many investors are looking for actively managed investment solutions from established managers employing strategies that can help reduce volatility in unpredictable markets while providing attractive risk adjusted returns," said David C. Saunders, co-lead portfolio manager of Franklin K2 Alternative Strategies Fund and cofounding managing director of K2 Advisors. "We believe this Fund is an ideal solution to meet those needs, and are thrilled to offer retail investors access to several of the strategies and managers that K2's institutional investors have long had access to."

    "The Fund seeks to provide access to alternative sources of capital appreciation, using the same investment and risk management process K2 Advisors has employed on behalf of its institutional clients worldwide for nearly 20 years," said William A. Douglass III, the Fund's co-lead portfolio manager and cofounding and managing director of K2 Advisors. "For investors looking to complement their fixed income and equity holdings through a diversified, multi-manager approach with lower correlations to traditional asset classes, we believe this Fund can be an important tool in their arsenal."

    William Yun, CFA1, executive vice president, Franklin Templeton Alternative Strategies, added, "K2 Advisors has a history of integrating a conservative, risk-based philosophy and advanced risk management systems into its hedge fund investment strategies. In developing the Franklin K2 Alternative Strategies Fund, Franklin Templeton has built on that expertise, bringing to bear the company's full global resources in risk management, compliance, distribution, technology and operations to create a compelling offering for investors that addresses today's uncertain market conditions."

    Franklin K2 Alternative Strategies Fund gives investors access to a group of unaffiliated, institutional-quality hedge fund managers with strong track records of delivering superior risk-adjusted returns over multiple market cycles. The Fund's initial set of sub-advisorsii includes:

    • Basso Capital Management, L.P. •

    • Chatham Asset Management, LLC •

    • Chilton Investment Company, Inc. •

    • Impala Asset Management LLC •

    • Jennison Associates LLC •

    • Lazard Asset Management LLC •

    • Loomis Sayles & Company, L.P. •

    • P. Schoenfeld Asset Management LLC •

    • York Capital Management L.P. •

    High-net-worth individuals and certain institutional investors may also be interested in the Fund for a variety of reasons, including its daily liquidity in comparison to traditional hedge funds and more efficient (e.g. 1099) tax reporting due to its tax status as a regulated investment company.

    About K2 Advisors

    K2 Advisors provides integrated hedge fund product solutions covering multiple strategies to sophisticated institutional and high-net-worth investors worldwide. Since its inception, K2 as an enterprise has focused solely on the business of hedge fund investing. From a small organization with less than US$10 million in assets under management in 1994, the firm has steadily grown into one of the largest hedge fund investment advisory firms in the world.

    The firm's investment philosophy is centered on a steadfast commitment to the prudent allocation of client capital -- with an emphasis on rigorous and sophisticated risk management programs -- while seeking to generate steady asymmetric returns (in short, maximizing participation in positive markets while seeking to protect in down markets through fewer and less negative returns). K2 allocates to hedge fund strategies that exhibit lower volatility and correlation to the broad capital markets to achieve its investment objectives. Products offered include discretionary and non-discretionary custom-tailored investment programs, commingled funds of hedge funds, and hedge fund investment advisory services.

    The Stamford, CT-based company has a global presence with 115 employees and offices in New York, London, Tokyo, Hong Kong and Sydney. For more information, please visit www.k2advisors.com.

    On November 1, 2012, K2 became part of Franklin Templeton Investments through the acquisition of a majority interest in K2's parent company, K2 Advisors Holdings, L.L.C.

    About Franklin Templeton Alternative Investments and Solutions

    Franklin Templeton's alternative investment and solutions offerings include the:

    • Global asset allocation and solutions capabilities of Franklin Templeton Multi-Asset Strategies;

    • Integrated hedge fund product solutions of K2 Advisors;

    • Commodities and managed futures strategies of alternative investments specialist Pelagos Capital Management;

    • Emerging markets private equity and capabilities of Darby Private Equity and Templeton Emerging Markets Group;

    • Global property and real asset offerings of Franklin Templeton Real Asset Advisors; and

    • Selected global macro strategies of Franklin Templeton Fixed Income Group.

    About Franklin Templeton Investments

    The Fund's principal underwriter is Franklin Templeton Distributors, Inc., a wholly owned subsidiary of Franklin Resources, Inc. (NYSE: BEN), a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2 investment teams. The San Mateo, CA-based company has more than 65 years of investment experience and over $868 billion in assets under management as of October 31, 2013. For more information, please call 1-800/DIAL BEN® or visit franklintempleton.com.

    Connect with Franklin Templeton on Twitter (@FTI_US), Facebook and YouTube (FranklinTempletonTV).

    Note to Editors: Franklin K2 Alternative Strategies Fund

    All investments involve risks, including possible loss of principal. The market values of securities owned by Franklin K2 Alternative Strategies Fund will go up or down, sometimes rapidly or unpredictably. The Fund's performance depends on the manager's skill in selecting, overseeing, and allocating Fund assets. The Fund is actively managed and could experience losses if the Investment Manager's and Sub-Advisors' judgment about particular investments made for the Fund's portfolio prove to be incorrect. Some Sub-Advisors may have little or no experience managing registered investment companies. Foreign investments are subject to greater investment risk such as political, economic, credit and information risks as well as risk of currency fluctuations. Investments in derivatives involve costs and create economic leverage, which may result in significant volatility and cause the Fund to participate in losses that significantly exceed the Fund's initial investment. Lower-rated or high yield debt securities involve greater credit risk, including the possibility of default or bankruptcy. The Fund may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Merger arbitrage investments risk loss if a proposed reorganization in which the fund invests is renegotiated or terminated. Liquidity risk exists when securities have become more difficult to sell at the price they have been valued. The Fund may invest in investment funds, which may be more costly than investing in the underlying securities directly. Please see the prospectus and summary prospectus for information on these as well as other risk considerations.

    Investors should carefully consider a fund's investment goals, risks, charges and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, talk to your financial advisor, call us at (800) DIAL BEN /(800)342-5236 or visit franklintempleton.com. Please carefully read a prospectus before you invest or send money.

    1. CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

    Copyright © 2013. Franklin Templeton Investments. All rights reserved.

    i Franklin K2 Alternative Strategies Fund's underlying investment strategies include, but are not limited to the following:

    • Long Short Equity Strategies - Long short equity strategies generally seek to produce returns from investments in the global equity markets by making long and short investments in common stocks and common stock indices. These strategies are generally focused on risk-adjusted returns and capitalize on the sub-advisor's views and outlooks for specific equity markets, regions, sectors and securities. Examples of long/short equity strategies include: (i) growth-focused strategies; (ii) value-focused strategies; (iii) market-neutral strategies (e.g. maintaining net exposures between 20% short and 20% long); (iv) sector-focused strategies (e.g. technology, healthcare and financials); and (iv) regionally focused strategies (e.g. Europe, Asia).

    • Relative Value Strategies - Relative value strategies encompass a wide range of investment techniques that are intended to profit from pricing inefficiencies in related securities. These strategies generally involve taking a position in one financial instrument and simultaneously taking an offsetting position in a related instrument in an attempt to profit from incremental changes in the price differential. Examples of relative value strategies are: (a) credit long short strategies; (b) credit arbitrage; (c) convertible arbitrage; and (d) volatility arbitrage.

    ? • Event Driven Strategies - Event driven strategies invest in securities of companies undergoing corporate events. These strategies are generally focused on analyzing the impact of the company-specific or transaction-specific event on security valuations. Examples of such events include mergers, acquisitions, transfers of assets, tender offers, exchange offers, recapitalizations, liquidations, divestitures, spin-offs, equity restructurings and reorganizations.

    • Global Macro Strategies - Global macro strategies generally focus on macroeconomic opportunities across numerous markets and instruments. Investments may be long or short and based on either relative value or directional views of a market, a currency, an interest rate, a commodity or any macroeconomic variable. Examples of global macro strategies include discretionary and systematic macroeconomic strategies.

    ii The sub-advisors listed above are those which are managing the assets of the Fund as of November 18, 2013. K2 may add or subtract sub-advisors in the future, subject to approval of Fund's Board of Directors

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