Ireland and Hungary represent two of the sickest economies on a sick continent. But that hasn’t stopped Templeton Global Bond Fund from amassing major positions in the government bonds of those nations.
The fund is run by star manager Michael Hasentab, who has been compared to Pimco’s Bill Gross.
Templeton Global owns at least $2.5 billion in Irish government bonds and $3 billion in Hungarian government bonds, The Wall Street Journal reports. The Irish debt has performed best, jumping more than 35 percent from mid-2011.
It’s quite a contrarian bet. Most investors are running for the safety of German government bonds and Treasurys.
Hasentab declined to comment, but analysts are impressed with his moves.
“The firm has given him a lot of freedom to execute a unique strategy, and it’s paid off,” Miriam Sjoblom, an analyst at Morningstar, tells The Journal.
But some caution is in order, she says. “The risks that he’s taking here are pretty considerable, and there is the potential for the fund to suffer a bad spell.”
The fund has produced an annualized return of 10.2 percent over the past five years, ranking it in the top 5 percent of world bond funds, according to Morningstar data.
The main issue for Hasentab may be his skill in exiting the Irish and Hungarian bond positions. Many damaged securities have a dead cat bounce. But if they fall back down, dumping them quickly is paramount for investors.
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