Fund in Focus: Franklin Bissett Core Plus Bond Fund

High quality portfolio drives gains

Historically, fixed income has been viewed as a safe haven in times of market uncertainty. In the depths of the broad market selloff earlier this year, fixed-income investments, particularly non-government bonds, sold off sharply as market liquidity for corporate and high-yield bonds dried up.

While the broader Canadian bond market was down about 9.5% over the worst of the volatility, corporate bonds were down nearly 23%, and government bonds were down approximately 6.5%.

In comparison, Franklin Bissett Core Plus Bond Fund invests in a diversified portfolio of Canadian government and investment-grade corporate bonds. Additionally, it can invest up to 30% in higher yielding non-core investments like foreign government and corporate bonds, high-yield bonds, and preferred shares. It was down just shy of 9% peak to trough for the full-freight advisor sold units. Since bottoming in March, the fund has rallied nicely, recovering nearly all of its losses. Year to date to Nov. 30 the fund is up 7.0%.

Managed by a team headed by Thomas O’Gorman and Darcy Briggs, the fund uses an investment process that blends a top-down macro review with bottom-up sector and security analysis.

The top-down macro review looks at global economic trends, interest rate outlooks, growth and inflation expectations, central bank policies, and sector fundamentals. This helps the team determine most attractive areas of the fixed-income universe and how they should be positioned from duration, yield curve, sector, and country perspectives.

The bottom-up security analysis looks to find good, high-quality corporate bonds, considering valuation, duration, fundamentals, management, and liquidity.

At the end of November, the fund had 43% invested in government bonds, and more than half invested in corporate bonds. Credit quality is high, with more than half the portfolio rated AA or better.

Despite the fund’s high allocation to corporate bonds, it held up relatively well throughout the recent market turmoil, all things considered. To Nov. 30, it posted 3-year average annual compounded rate of return of 4.3% and a 5-year return of 4.0%, matching the category average.

With its deep management team, disciplined investment process, and somewhat flexible mandate, it is a fund worth taking a more detailed look to see if it is appropriate for your situation.

Franklin Bissett Core Plus Bond Fund
Fund Company: Franklin Templeton Investments
Fund Type: Canadian Fixed Income
FundGrade Rating: C (November)
FundGrade A+ Award: 2018
Style: Top-down macro, bottom-up security selection
Risk level: Low to Medium
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Thomas O’Gorman since July 2010, Darcy Briggs since December 2014
MER: 1.28%
Fund codes: TML200 (Front-end load), TML515 (Low-load)
Minimum investment: $500

Dave Paterson, CFA, is a money manager and an expert on investment fund research and due diligence on a variety of investment products.

Notes and Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice. Dave Paterson is employed as an advising representative (portfolio manager) by Empire Life Investments Inc. (ELII), a subsidiary of Empire Life Insurance Company. ELII is the investment fund manager and portfolio manager of the Empire Life Mutual Funds and the portfolio manager of the Empire Life Segregated Funds (collectively, the Empire Funds). As such, his employment and his compensation may be connected to the success of ELII and the Empire Funds. From time to time, the Empire Funds may buy, sell, hold, or otherwise have an interest in securities that may be discussed in this report.