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Argentina wipes €1.6bn from Franklin Templeton funds

Very Grungy Vintage Argentine Flag, Argentina Grunge Background Texture

Franklin Templeton bond funds run by Michael Hasenstab lost $1.8bn (€1.6bn) in a single day as investors pulled money following the weekend’s Argentinian primary election.

The peso fell more than 20% against the dollar after rank outsider Alberto Fernández won a surprise 47% of the vote in Sunday’s primary election against incumbent Mauricio Macri, who received less than 33%.

Yields on Argentinian government bonds maturing in 2021 spiked to about 38% on Monday, while the yield hit almost 15% for those maturing in 2028. Argentina’s Merval equity index fell 37% in dollar terms.

Investors subsequently fled Argentine assets in their droves and six of Hasenstab’s funds with the most significant exposure to the country suffered outflows totalling $1.8bn (€1.6bn), according to calculations by the Financial Times based on AUM and portfolio weightings as of 31 July.

The $11.3bn Templeton Emerging Markets Bond fund has 10.46% exposure to Argentina, according to its factsheet. The FT calculated the fund fell 3.5%, or $400m, on Monday.

Templeton Emerging Markets Bond fund (one-year performance EUR)

Meanwhile, the $17.4bn Templeton Global Total Return fund, which has 6.36% exposure to Argentina, lost $440m and the $33.1bn Templeton Global Bond fund, which has a 3.35% exposure to the South American country, lost $592m.

Three other funds run by Hasenstab lost about $362m in total, the FT said.

Chelsea Financial Services managing director Darius McDermott said the loss was a huge number but most emerging market debt funds would have been hit. The question, he added, should be what percentage the losses make up of Hasenstab’s overall assets under management.

“A lot of emerging market bond funds will have lost money if they had exposure to Argentina. Historically, Hasenstab has tended to be quite volatile and will go sometimes where others don’t have the risk appetite and that has historically led to chunks of volatility,” McDermott said.

“So yes, of course it is a huge number. My question is what percentage did he lose; were they the worst performing bond funds in their sector?”

According to FE, the Templeton Emerging Markers Bond fund is fourth quartile over all periods, returning investors -0.6%, 5% and 1.5% in sterling terms over one, three and five years respectively. This compares with 15.1%, 14.3% and 35.9% for the IA Global Emerging Markets Bond sector over the same period.

The Luxembourg domiciled Templeton Global Total Return fund has returned 18.3% and 40% in US dollar terms over three and five years respectively versus the FO Fixed Int – Global sector’s 14.3% and 41.4%.

Franklin Templeton declined to comment.

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Sebastian Cheek

Sebastian joined Last Word Media in 2017 as editor of Portfolio Adviser. He previously spent 10 years as a journalist and editor in the UK institutional investment sector, most recently as editor...

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