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Templeton Global Income Fund (GIM) - increased usage of currency forward contracts
Old 05-09-2012, 07:35 AM   #1
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Templeton Global Income Fund (GIM) - increased usage of currency forward contracts

Few of us use GIM for international bonds exposure.
I'm reading the GIM semiannual report and noticed a lot of minuses in the currency exposure breakdown tables.
Than I see this:
"The Fund’s Board of Trustees has authorized the Fund to increase use of currency forward contracts for hedging and investment purposes when the
investment manager believes it is advisable to do so."

Historically I've been pleased with this fund performance, I hope that excessive use of derivatives won't derail it.
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Old 05-09-2012, 08:57 AM   #2
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Good that you are reading the details. I don't get past the summary financial data. Brewer and some other folks here are more familiar with issues like you are raising. AFAIK you want either a hedged or an unhedged fund depending on whether you are concerned with currency exchange rates. I generally prefer unhedged but one is not necessarily better than another. Days like toady and with issues like the volitility of the Euro hedging may be a good thing. Anyway, this has been a good fund for me and I intend to hold it for a long term, if I sold it I would have to figure out what to buy and I am clueless except for maybe the new Vanguard fund.
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Old 05-09-2012, 09:36 AM   #3
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Since I have a lot of faith in the people who manage GIM, I would not get excited about this change. I would guess that the use of currency derivaties would allow the manager to create synthetic positions in bonds where buying the actual bonds is either impossible, expensive or undesrable. For example, suppose you want Euro exposure but don't actually want to buy a specific sovereign in the EU. You might buy a US corporate bond, pair it up with a EUR currency forward and synthetically create a Euro denominated bond that does not have direct exposure to any of the EU sovereign credit names.
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gim, global bond, international, templeton

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