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Franklin Global Real Estate Fund - News
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Franklin Global Real Estate (USD) comment - Mar 11
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Tuesday, 14 June 2011
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Fund Manager Comment
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Overview
For the quarter ended 31 March 2011, FTIF Franklin Global Real Estate Fund returned net 2.18% (in U.S. dollars), and its benchmark, the S&P Global REIT Index, returned 5.57% (also in U.S. dollars). The fund's top contributors to relative performance for the first quarter included underweighted positions in U.S.-based mall/outlet REIT General Growth Properties, Japanese office space REIT Nippon Building Fund, and Australian retail REIT Westfield Group, along with an overweighted position in Canadian residential REIT Boardwalk Real Estate Investment. The fund's detractors from relative performance for the three-month period included Japanese diversified companies Mitsui Fudosan and Mitsubishi Estate, as well as several Hong Kong-based diversified property companies that are not components of the benchmark index: Sun Hung Kai Properties, Hang Lung Properties and Hysan Development. Singapore-based Keppel Land and office space property REIT Hongkong Land Holdings Ltd. also weighed on results. Over the quarter, the portfolio's investment strategy continued to emphasize higher-quality stocks that generate strong cash flows that comfortably cover their dividends.
Performance Review
For the quarter ended 31 March 2011, FTIF Franklin Global Real Estate Fund returned net 2.18% (in U.S. dollars), and its benchmark, the S&P Global REIT Index, returned 5.57% (also in U.S. dollars). The fund's top contributors to relative performance for the first quarter included underweighted positions in U.S.-based mall/outlet REIT General Growth Properties, Japanese office space REIT Nippon Building Fund, and Australian retail REIT Westfield Group, along with an overweighted position in Canadian residential REIT Boardwalk Real Estate Investment. Fund results benefited from an underweighted position in General Growth Properties Inc. as the REIT's share price retreated during the quarter. Shares of General Growth fell after investors were sceptical about the company's ability to achieve its stated strategy of growing its cash flow, and our analysis determined that the company's valuation was expensive. Similarly, fund results benefited from an underweighted position in Japanese office space REIT Nippon Building Fund because its share price declined. In addition, three Canadian REITs-residential REIT Boardwalk Real Estate Investment Trust and diversified property REITs Canadian Real Estate Investment Trust and H&R Real Estate Investment Trust-rallied and boosted results relative to the benchmark index. Canadian REITs have been supported by healthy fundamentals, the low cost of debt capital and strong investor demand. The fund's underweighted position in Westfield Group benefited relative fund results after its return lagged the index's gain for the quarter. Westfield struggled mainly due to investor perception that its growth is disappointing because of its exposure to the declining U.S. dollar and its relatively weaker U.S. market exposure compared to its mall peers. Another contributor was an overweighted position in U.S.-based industrial property REIT AMB Property Corp. The company rallied late in the quarter and contributed to relative fund results after its management announced in late January that it planned to merge with ProLogis to form the largest industrial property REIT in the world. The diversified property sector was the largest detractor from relative fund results during the period, primarily due to the underperformance of several property companies that are not components of the benchmark index, including Japanese property companies Mitsui Fudosan Co. Ltd. and Mitsubishi Estate Co. Ltd., Hong Kong-based Sun Hung Kai Properties Ltd., Hang Lung Properties Ltd. and Hysan Development Co. Ltd., and Singapore-based Keppel Land Ltd. The decline of Sun Hung Kai Properties, Hang Lung Properties and Hysan Development during the three-month period was partially caused by concerns about further restrictive government measures, as well as capital outflow due to heightened geopolitical risks in the Middle East. In Singapore, property companies, including Keppel Land, retreated during the quarter as Singapore's government announced incremental policy measures to rein in property speculation. Additionally, the share price of Hong Kong-based property company Wharf Holdings Ltd., which is not a component of the index, dropped and weighed on relative fund performance. The company was negatively impacted by the same forces as the other Hong Kong-based property companies. Investors also sold shares of Wharf Holdings after its management announced a HK$10 billion secondary equity issuance earmarked for expansion in mainland China. Shares of two office space property REITs, Kenedix Realty Investment Corp. in Japan and Hongkong Land Holdings Ltd. (not a component of the benchmark index), fell during the quarter and pressured fund performance. Additionally, the fund's investment in Starwood Hotels & Resorts Worldwide, which is not a component of the benchmark index, declined and further detracted from relative fund results in the hotel/resort sector.
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Sector Changed
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Tuesday, 28 December 2010
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Official Announcement
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The fund changed sectors from Global--Equity--Varied Specialist to Global--Real Estate--General on 28 Dec 2010
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Franklin Global Real Estate (USD) comment - Jun 10
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Thursday, 26 August 2010
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Fund Manager Comment
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Overview
For the quarter ended 30 June 2010, FTIF Franklin Global Real Estate (USD) Fund returned net -4.76%, while its benchmark, the S&P Global BMI REIT Index (hedged into U.S. dollars), returned -6.36%.
The fund's top contributors to relative performance in the second quarter included industrial property REIT Dupont Fabros Technology, apartment REITs Equity Residential and UDR, and health care REIT Ventas-all based in the U.S. Relative performance also benefited from a lack of exposure to French diversified REIT Fonciere des Regions S.A.
The fund's top detractors from relative performance for the three-month period included U.S.-based retail property REIT Developers Diversified Realty, Netherlands-based diversified REIT Wereldhave, U.S.-based retail property REIT Cedar Shopping Centers and Japanese developer Mitsui Fudosan.
On a regional basis, the portfolio's positioning in France and Australia, made significant contributions to relative fund performance, while investments the Netherlands, Japan, Singapore, Hong Kong and the United States were the most significant detractors.
Over the quarter, the portfolio's investment strategy continued to emphasize high-quality stocks that can potentially generate strong cash flows to comfortably cover higher dividend yields.
Market Review
Enveloped by Europe's sovereign debt crisis, world equities fell heavily during the second quarter of 2010. Confidence in a sustained global economic recovery deteriorated further on China's efforts in moderating growth and a worldwide slowdown in manufacturing activity. By quarter-end, most major stock markets were deep in negative territory. Emerging markets performed better than developed markets, as Europe suffered the largest quarterly equity loss compared with Asia, the U.S. and Latin America.
With a near-1000-point flash crash in May, the U.S. Dow Jones Industrial Average ended the quarter below 10,000 and at a new low for the year. The Federal Reserve's hold on near-zero interest rates and its subdued comments on the state of the U.S. economy echoed a stagnating labor market with disappointing payroll gains and record-high long-term joblessness. Nonetheless, higher wages and salaries lifted retail spending and pushed the savings rate to its highest level since last fall. U.S. companies posted generally positive corporate earnings, but industrial activity slowed in June after expanding for much of the quarter due to increasing export demand. Historically low mortgage rates and federal homebuyer tax credits that expired in April provided a temporary lift to a still-struggling housing market.
The European sovereign debt crisis gained momentum during the quarter as austerity measures of teetering economies dominated headlines. Europe's rescue loan for Greece, as well as its government debt purchases and stabilization fund for other fiscally strained countries such as Spain, Portugal, Ireland and Italy, failed to inspire global confidence. Greece, Romania and Hungary suffered the biggest equity selloffs, as many countries ran into roadblocks trying to push through unpopular spending cuts and adhere to deficit limits set by the European Union and International Monetary Fund. Some investors worried about possible effects of such tough fiscal medicine and feared Europe would need a long time to recover from its homegrown quagmire. The health of eurozone banks was again called into question with the failure of a small Spanish bank, and consequently, the European Central Bank agreed to widen and publish results of its bank stress tests in July.
Tensions on the Korean peninsula escalated in the second quarter and pressured stock markets in Asia. While Vietnam and Indonesia yielded positive returns, Australia experienced the largest regional decline and the Australian prime minister was forced to resign in June. Similarly, Japan replaced its prime minister and the new cabinet proposed a broad tax reform in an attempt to get the country's debt under control. In China, efforts to restrict speculative property purchases began to ease home sales and prices, and manufacturing activity, while still expanding, decelerated to a more sustainable pace. After a nearly two-year lock, China decided to increase its exchange-rate flexibility and allow for a gradual yuan appreciation. Across the strait, a historic trade liberalization agreement was reached between China and Taiwan, which removed most of the remaining trade and investment barriers and bound the two economies closer than ever.
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