The Templeton Global Bond Fund (TPINX) is a popular international mutual fund that seeks current income with capital appreciation and growth. With a five-star Morningstar rating, the fund targets opportunities in currencies, interest rates, and sovereign credit through investments in government bonds and derivative instruments. The goal is to help investors potentially achieve attractive returns while diversifying their portfolio.
In this article, we will look at the bond fund in greater detail and identify some of the key considerations for international investors.
A Brief Overview
The Templeton Global Bond Fund uses a combination of quantitative and qualitative analysis, along with on-the-ground research, to identify global investment opportunities. The team focuses on conducting in-depth country analysis to identify economic imbalances leading to value opportunities in currencies, interest rates, and sovereign credit, while continually evaluating risk and shifting focus as global economic and credit cycles evolve.
The fund has a minimum investment of $1,000 with approximately $12.13 billion in assets under management, as of mid-2017. Morningstar classifies the fund’s portfolio as having a limited duration — meaning less interest rate risk than other funds — with low to medium-quality bonds, which is to be expected with most international bond funds. In terms of risk-adjusted returns, the fund has, overall, outperformed its benchmarks with comparable risk.
The following fees apply to investors in the mutual fund:
|Gross Expense Ratio||0.94%|
|Net Expense Ratio||0.92%|
|Max Initial Sales Charge||3.75%|
* As of May 1, 2021 (updated annually).
According to Morningstar, these fees are below average for comparable funds and a modest turnover helps reduce ancillary trading costs that can eat into returns. Many global bond exchange-traded funds (ETFs) may offer lower expense ratios, but investors don’t have access to the same experienced management team at the helm. Investors should consider these fees, however, when deciding between investments.
Benefits and Risks
The Templeton Global Bond Fund has been around since 1986 with a strong track record when it comes to performance and Morningstar ratings.
The benefits of investing in the fund include:
- Diversification. The fund’s diversified portfolio includes over 183 different positions located around the world. While these positions are always in flux, the fund had 47.43% exposure to the Americas, 66.04% exposure to Asia, -16.92% exposure to Europe and 3.45% exposure to the Middle East/Africa, as of May 31, 2021. The fund had 93.96% invested in fixed income and 6.04% invested in cash.
- Experienced Management. The fund has been managed by Michael Hasenstab since 2001 and is backed by a large team of analysts located around the world.
- Limited Duration. The fund’s duration tends to be limited, which means that the fund may have less interest rate risk than comparable bond funds. This could make it an attractive fixed income investment even as central banks increase interest rates.
The risks of investing in the fund include:
- Fixed-Income Risks. Many fixed-income investments are dependent on interest rates set by central banks. In addition, fixed income tends to be less liquid than equities during times of economic crisis, which could have an adverse effect on the fund.
- Political Risks. Sovereign debt securities carry greater risk than domestic bonds since they are subject to greater political risk. For example, a country may decide not to repay its bonds and default on its debt due to factors outside of their control.
- Interest Rate Risk. Interest rates have been near record lows throughout the developed world following the 2008 financial crisis. Rising interest rates could decrease the prices of bonds in the fund.
Alternatives to Consider
There are many different global bond mutual funds and ETFs. Morningstar lists over 300 different Global Bond mutual funds, while ETFdb.com lists seven ETFs that meet similar criteria.
Some popular global bond ETFs include:
- RiverFront Strategic Income Fund (RIGS)
- FlexShares Ready Access Variable Income Fund (RAVI)
- Invesco Global Short Term High Yield Bond Portfolio (PGHY)
- SPDR Bloomberg Barclays International Treasury Bond ETF (BWX)
- iShares International Treasury ETF (IGOV)
Some popular global bond mutual funds include:
- PIMCO Foreign Bond Fund (PFOAX)
- Payden Global Fixed Income Fund (PYGFX)
- Morgan Stanley Pathway Funds International Fixed Income Fund (TIFUX)
- SEI International Fixed Income Fund (SEFIX)
- DFA 5-Yr Global Fixed Income Portfolio (DFGBX)
The Bottom Line
The Templeton Global Bond Fund is a popular international fixed income mutual fund. With a one-star rating from Morningstar and a history of high returns, international investors should carefully consider the fund as a fixed income option for their portfolio. However, they should also be mindful of the expenses associated with the fund and the unique risk factors that impact the asset class.