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Friday July 30, 2010
Templeton Global Income (GIM): 'Time to pounce'
by Richard Band, editor Profitable Investing We’  ve had some good luck recently in the bond arena; now I’ve found another trading opportunity: Templeton Global Income Fund (GIM), a global government bond fund that yields 5.6%.Plus, I think we’re in for a nice capital gain as the dollar settles down from its torrid run against most foreign currencies. Templeton Global Income is run by one of the finest international bond managers, Dr. Michael Hasenstab. 
Over the past decade, this closed-end fund has rolled up a sizzling total return of 235% at net asset value (through mid-June). Meanwhile, the S&P 500 stock index has lost 11%, even with reinvested dividends. At last glance, GIM had 90% of its portfolio in government bonds. If we were talking about U.S. Treasuries, I wouldn’t give the fund another thought. But GIM is avoiding U.S. bonds these days. Ditto for low-yielding Japanese bonds. Instead, Hasenstab owns a slug of bonds from the Asia-Pacific region (36%), followed by smaller stakes in Europe, Latin America and Africa. Result: GIM yields a healthy 5.6%, so you’ll earn about 75% more interest for every dollar you invest than you would with a 10-year Treasury note. (Monthly distributions.) What’s more, because the fund’s average maturity stands at 8.2 years, you aren’t taking a lot of interest-rate risk. When rates go up, bond prices fall—and the longest-dated bonds fall hardest. As a closed-end fund, GIM doesn’t continuously issue and redeem shares, the way open-end mutual funds do. Instead, shares trade in the open market at whatever price two investors agree on. More often than not, because of the fund’s stellar track record, GIM fetches a premium to the value of the bonds in its portfolio (net asset value). Lately, though, GIM shares have slipped to about par and have even, on some days, been quoted at a small discount. For the penny-chasers among us, it’s one more reason to pounce! Learn more about this financial newsletter at Richard Band's Profitable Investing. |
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