This fund is little offbeat. It isn't a blockbuster, but those looking for an extra pop should tie-up with this fund. Mind you, unlike older-gen MIPs, Templeton MIP doesn't assure regular returns but toils to attain it. With a stable equity and bond allocation, this fund comes in several flavours -- monthly, half-yearly, quarterly dividend plans plus growth option. What is unique to it is that each plan is managed independently, with a separate portfolio.
But what is spooking is the fact that despite being consistent and having a stable equity allocation, the growth option's long-term returns are somewhere in the middle of the category. Perhaps because a good portion (average 15%) of this small fund has always comprised Gujarat Gas and we all know +AA instruments respond with a lag to interest rate changes. Concentrating on single issue, when small in size makes it little risky.
Another stumbling block has been the fund's policy to load up stocks, and then forget them. What happens then is obvious: you are likely to miss the bus when a particular stock reaches its highest valuation. But this shouldn't become the grounds for expulsion by investors, as this fund is far less volatile than its same age-group peers are. Essentially, Templeton MIP feeds on AAA bonds but lately since 2001 it has been buying more below AAA papers. The motive: yield enhancement. Credit quality apart, the fund's proven record in gilt trading, of timely realignment of gilt exposure and duration bets, helped it take the lead in both bear and bull markets.
As for equity, Templeton MIP bought stocks in mid-2000 around the time when valuations had fallen considerably, which helped it guard asset erosion. But what has taken a little shine off its portfolio is its huge technology exposure (about 30% of its total equity stake), after all, for a small-statured fund, this could be suicidal. Incidentally, all equity funds from Templeton's stable are not concentrated but well diversified.
Regular income seekers ought to tread with caution if you aren't comfortable with its volatile equity disposition. But those willing to take a chance will be well compensated for taking the added risk.
This article was originally published on July 04, 2002.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
