Fixed Income Fund – Templeton Global Total Return

Beside equity investment, one can invest in fixed income asset class such as government bonds and corporate bonds. In order to have exposure in a basket of fixed income assets, one can consider investing in fixed income fund managed by professional fund houses.

I was recommended one such fund – FTIF Templeton Global Total Return Fund A(Mdis) SGD H-1 – by a relationship manager. The fund invests in both government and corporate debt securities and other financial derivatives on ancillary basis. The base currency of this fund is in US dollar but Franklin Templeton Investments created a Singapore dollar equivalent of this global fund with Singapore dollar hedged against US dollar. Investors deal in Singapore dollar only without worry of converting US dollar to Singapore dollar.

This fund received coupon (interest payments) from investing in debt instruments and subsequently it pays out distribution on a monthly basis to holders of this fund. The Net asset value (NAV) of the fund is dependent on the holdings of various debt securities and the value moves with changes in the value of these securities on a daily basis. One downside risk is bad government bonds or bad corporate bonds hence reducing the overall net asset value.

Based on 31 October 2012 factsheet, Fund characteristics:
Average duration = 2.7 years
Weighted average yield to maturity = 6.1%
Weighted average maturity = 3.89 years

So this is not a basket of long-dated debt securities, average maturity is 3.89 years.

Over the period of one year from December 2011 to November 2012, total distribution amounted to 46.2 cents per unit. Say you have bought 1641.414 units, total distribution = $758.33 on investment of $20,000, the return was about 3.79% per annum.

Besides monthly distribution, one hopes for capital appreciation of the fund. As an example, the NAV as at 7 September 2012 was S$11.53 per unit. The NAV as at 5 December was $11.98, that was an increased of 45 cents per unit over three months (+3.9%).

There are risks involved in fixed income securities. Read up before investing.

Copyright © 2012, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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