Award winning Franklin Templeton US Equity fund outperforms the benchmark
The Franklin Mutual Beacon Fund, managed by Franklin Templeton Investments, has won a coveted Raging Bull Award for the best offshore USA Equity General Fund in 2006.
Michael King, SA Country Head of Franklin Templeton, says that this prestigious award now brings their number of Raging Bull achievements to six.
Based in US Dollars, with total assets of over $ 3 billion, its objective is primarily long-term capital appreciation from equity investments.
With an annual dollar return of 18,3 % for 2006, the fund outperformed its benchmark, the S & P 500 Index, which posted a 15,35 % appreciation for the year. Much of the annual return came during the fourth quarter where the fund posted a gain of 8,10 %, with the benchmark coming in at 6,59 %.
The fund was established in 1997 and cumulative returns have been 42,5 % over three years and 53 % over five years.
As at 31 December, the geographical spread of investments was 60 % in the US, with the heavier industry weightings being in food, beverage and tobacco (13 %), banks (11 %) and insurance (11 %).
During 2006, the US economy advanced at a moderate but slowing pace, dampened by a weakening housing market. Corporate profits and consumer spending held up, although large purchases such as homes and cars saw a decline.
Outside of the US, economies continued to grow, with strong corporate and consumer demand, acceptable inflation and moderate interest rate hikes. The global economy overall experienced some volatility midway through the year when high energy prices, interest rates and US housing conditions saw markets declining, but favourable conditions have seen these markets return to their prior high levels.
With a long term 4,6 % holding in Warren Buffets Berkshire Hathaway, a US holding company with substantial operations in insurance and re-insurance, Berkshire was the single largest contributor to the funds performance. It gained over 22 % last year, with the second half price appreciation being driven by waning concern over severe hurricane threats. Other top equity performers in the fund were the Korean tobacco products manufacturer, KT&G Corporation, and US media company News Corp.
With the majority fund holding in US equities, this allocation performed well during the year. The major US indices all posted double digit returns, as did all significant non US markets. US and European markets reached six year highs and exchanges in emerging markets saw new record highs.
US Fund investments that came in on the downside for the year were Massey Energy, a mining company, IT giant Dell, and medical device company Boston Scientific.
The S& P fund management rating is a reputable AA and the fund manager continues to seek out attractive undervalued stocks, although the past four years of great market performance is making this more challenging to accomplish.
The Franklin Mutual Beacon Fund is registered with the SA Financial Services Board and distributed locally on behalf of Franklin Templeton Investments by accredited Financial Advisors and select financial institutions. Franklin Templeton was first established sixty years ago and has been in South Africa for the past ten. Currently, twenty of their funds are registered here with the FSB and the firm seeks to register additional funds during 2006.
For South Africans investing in offshore Franklin Templeton funds, the investment forms part of the offshore investment allowance with Reserve Bank approval required. King says the fund is ideal for the investor who has achieved his local investment objectives and is now looking for global equity exposure with a focus on US stocks. "Offshore diversification is the key to the construction of any investment portfolio, our funds provide market leading returns for clients globally."
