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Templeton Global Climate Change Fund - News
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Fund Name Changed
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Friday, 6 April 2018
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Official Announcement
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The Templeton Global (Euro) Fund will change it's name to Templeton Global Climate Change Fund, effective from 05 March 2018
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Templeton Global (Euro) comment - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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Despite challenges, global economic growth and corporate profitability remained robust during the quarter and stocks rose, albeit amid heightened volatility. For the quarter ended 31 March 2011, the fund gained 1.13% (net in euros). The fund's benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World Index, declined 1.18% (also in euros). Stock selection in energy and an overweighting in Europe contributed to relative performance during the quarter. Our holdings in information technology, several of which were affected by the earthquake in Japan, were the largest detractors. The fund has above-index weightings in health care and energy balanced by low weightings in materials, consumer staples and utilities, reflecting the relative availability of attractive investment opportunities, according to our investment metrics. At Templeton, a focus on long-term fundamentals at the security level drives our process, an important point for our clients to remember during periods of macroeconomic and geopolitical instability. Despite the recent return of volatility, we remain confident in the long-term outlook for our select equity holdings.
Market Review
Global equities rose for the third consecutive quarter in the first three months of 2011 despite unfolding events that posed significant challenges to the two-year-old rally. First, a wave of unrest across the Arab world toppled sitting governments in Tunisia and Egypt and sparked a violent conflict in Libya. Then, on 11 March, Japan suffered its largest earthquake in recorded history, a 9.0 magnitude temblor, followed by a 10-meter tsunami that left nearly 30,000 dead or missing. The tragedy was compounded by an unfolding nuclear disaster at the crippled Fukushima Daiichi plant, and Japan's Nikkei Index plummeted nearly 20% in a matter of days before partially recovering losses. In addition, the European sovereign debt crisis deepened in March as Portugal failed to pass an austerity budget, its prime minister resigned, and rating agencies downgraded the country's debt. Meanwhile, in the United States, another protracted budget battle nearly shut down the government at quarter-end. Despite these challenges, global economic growth and corporate profitability remained robust during the period and stocks rose, albeit amid heightened volatility. The price of oil hit its highest levels in over two years as turmoil in the Middle East and North Africa (MENA) region contributed to rising commodity inflation. The U.S. dollar fell against the euro and commodity currencies, while the yen surged in the aftermath of the earthquake before a globally coordinated intervention reversed its rally.
Performance Review and Contributors to Performance
Energy provided the strongest individual sector performance in the portfolio. Chesapeake Energy Corp. rose as asset sales reinforced its balance sheet and established elevated valuations for the remainder of its portfolio of North American unconventional hydrocarbon deposits. U.S. oilfield services businesses Baker Hughes and Halliburton found their expertise in complex drilling strategies increasingly in demand as high oil prices encouraged exploration spending and made North America's unconventional oil and gas deposits increasingly attractive. Russian gas producer Gazprom gained ground on rising energy prices and the calculation that doubts about the safety of nuclear power following Japan's Fukushima incident would lead to increased use of gas in electricity generation. The portfolio is significantly overweighted in Europe. With European markets outperforming for the quarter, this allocation generated a substantial gain relative to the benchmark, with financial holdings prominent among the gainers. Dutch banking group ING Groep benefited additionally from calculations that the sale of its insurance assets might be more lucrative than expected. In addition, French insurer AXA's perceived sensitivity to financial markets, a disadvantage in late 2010, amplified its gains in 2011. The portfolio includes several Japanese information technology holdings affected by local market weakness following the earthquake and tsunami. Copier maker Konica Minolta Holdings had already cut its profit forecasts after third-quarter results missed expectations. The underperformance related to increased competitive pressures as rival firms introduced new models, and we think they should be short term in effect. Investment bank Nomura Holdings had been sluggish prior to the earthquake as softness in the Japanese equity market affected its brokerage business, and its shares weakened in the selloff that followed the catastrophe. Anti-virus software house Trend Micro reacted to doubts about the near-term profitability of some recent projects, although the emergence of smartphones and tablet computers should open up new markets for its products over the longer term. Elsewhere, U.S. Internet communications giant Cisco Systems had an indifferent fourth quarter as costs associated with new product introductions and anemic demand from consumers hit margins, negating solid overall sales growth. Turkish mobile telecoms business Turkcell also fell as its local market discounted regional unrest and bond market problems, though its shares rallied in March.
Strategy and Activity
The fund manager sold shares in European utility and telecom stocks and a U.S. financial company, reinvesting in companies we believe offer more attractive valuation criteria. These included Japanese railway and technology companies, Asian technology, software and steel businesses, a U.S. medical diagnostics operation and a UK office services company. The fund has above-index weightings in health care and energy balanced by low weightings in materials, consumer staples and utilities, reflecting the relative availability of attractive investment opportunities, according to our investment metrics.
Investment Outlook
At first glance, the market's recent fortitude in the face of heightened volatility may seem surprising. Yet, in our view, equities are fundamentally discounting mechanisms that represent the current value of estimated future cash flows, and we believe it is unlikely that lost Japanese economic output or lost Libyan oil production will materially impair structural profitability for the majority of global companies. At Templeton, this focus on long-term fundamentals at the security level drives our process-an important point for our clients to remember during periods of macroeconomic and geopolitical instability. Despite the return of volatility, we remain confident in the long-term outlook for our select equity holdings.
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Templeton Global (Euro) comment - Jun 10
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Thursday, 26 August 2010
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Fund Manager Comment
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First-quarter equity market gains were reversed as concerns mounted among investors about the European sovereign debt crisis and the sustainability of the U.S. economic recovery.
For the quarter ended 30 June 2010, the fund fell 5.96% (net in euros). The fund's benchmark, the MSCI All Country World Index, fell 2.74% (also in euros).
Several holdings performed well, but adverse currency effects and disappointing returns from the energy and health care sectors pulled down overall returns.
We took advantage of market volatility to replace several stocks nearing our price targets with businesses that we believed were oversold in relation to their long-term prospects.
Despite the recent return of volatility and anxiety, we still firmly believe that disciplined, value-oriented investors with a long-term horizon can potentially benefit from the current market environment.
Market Review
Equity markets saw first-quarter gains reversed as concerns about the security of European debt and the sustainability of the global economic recovery offset solid corporate results. Moves by the European Union and the International Monetary Fund to support troubled southern European economies failed fully to convince investors who remained wary of the area's debt and the financial institutions exposed to it. Economic releases and corporate earnings forecasts were supportive for most of the quarter, but they showed signs of strain during the latter part of June as investors became uneasy about progress in the U.S. and China. Commodity prices drifted, while concerns about financial stability pushed up short-term interest rates, although bond markets outside southern Europe strengthened. In currency markets, the yen was strong and the euro weak.
The somber market mood benefited defensive stocks as telecommunications and consumer staples outperformed, while energy, materials and financials came under pressure. In common currency terms, Asia ex-Japan performed strongly while Europe lost ground. Euro weakness limited the extent of market declines for continental investors.
Performance Review and Contributors to Performance
An underweighting in materials contributed to relative performance as mining stocks suffered from fears of a cooling in Chinese industrial demand and unease about proposed tax hikes in Australia. A solid return from packaging business Rexam augmented the gain as favorable currency effects, positive trends in its core beverage can and plastic packaging markets, and an attractive valuation stimulated demand for its shares. Soft drinks business Dr. Pepper Snapple Group announced strong first-quarter results and an accelerated stock buy-back program. U.S. mobile and long distance telecoms business Sprint Nextel enjoyed a strong quarter as surveys suggesting improved levels of customer satisfaction boosted hopes for improved customer retention. Swedish telecoms equipment business Ericsson moved up sharply as rising mobile telephony infrastructure spending, particularly in the U.S., fed into strong order inflow over the quarter. U.S. drugs business Watson Pharmaceuticals benefited from good first-quarter results, positive guidance and indications that its acquisition of Arrow Pharmaceuticals was proceeding well.
In energy, performance suffered from our overweighted position in BP, whose share price was under severe pressure as the company's problems in containing the oil spill in the Gulf of Mexico generated hostility from the U.S. government and threatened to unleash a deluge of compensation demands. Watson Pharmaceuticals notwithstanding, health care also disappointed, with sluggish returns headed by Irish pharmaceutical business Elan Corp., whose multiple sclerosis treatment Tysabri saw lower-than-expected uptake on concerns about its safety profile. The fund's European utilities holdings weakened on regulatory concerns, with operations exposed to Spain hit particularly hard as the fiscally challenged Spanish government froze impending tariff increases and announced a complete review of its remuneration policy. Greek telecoms business Hellenic Telecommunications declined as bond market turmoil and news of a fiscal austerity package dismayed investors, with a dividend cut further souring sentiment. With the fund holding an above-index portion of its assets in euro-denominated securities, foreign exchange effects were sharply negative.
Strategy and Activity
Volatile markets provided us with the opportunity to acquire what we believed to be attractive businesses at favorable valuations. A U.S. oil service business and European stocks involved in banking, chemicals, building and green power were added to the portfolio, replacing Asian telecom and information technology stocks, U.S. media and investment businesses and a European oil company whose valuations were closer to our targets. The fund ended the quarter overweighted in health care, information technology and telecoms and underweighted in consumer staples, materials and financials.
Investment Outlook
As we enter the third quarter of 2010, we believe stock prices remain primarily influenced by macroeconomic forces rather than the longer-term valuation and earnings fundamentals of specific companies. This environment has been difficult for fundamental value investors such as Templeton. Our overweighting in Europe, for example, has detracted from relative performance in recent quarters. However, we believe that Europe continues to offer attractive investment opportunities. According to our research, Europe is now cheaper than any other region in the world in terms of current earnings, forward earnings and book value, trading at roughly half its long-term average for each metric. And, despite its uneven debt distribution, total leverage in Europe is currently lower than that in the U.S., the UK and Japan. Furthermore, European policymakers have responded aggressively to the sovereign debt crisis, offering aid and expressing a concerted desire to hold down the currency to boost exports and ease the burdens of sovereign debtors.
While current imbalances in the global financial system represent a formidable challenge for policymakers and equity investors, corporate fundamentals have remained strong, excess corporate leverage has been reduced, valuations continue to be selectively attractive and emerging markets still represent powerful global growth catalysts for companies in a number of industries in our view. Despite the recent return of volatility and anxiety, we still firmly believe that disciplined, value-oriented investors with a long-term horizon can potentially benefit from the current market environment.
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