uploads///Portfolio Breakdown of the TEMIX

Looking at the Portfolio of the Franklin Mutual European Fund


Oct. 27 2016, Updated 1:41 p.m. ET

Franklin Mutual European Fund overview

The Franklin Mutual European Fund (TEMIX) notes that it “invests at least 80% of its net assets in securities of European companies that the investment manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value).”

This means that fund managers look for undervalued securities by arriving at an intrinsic value of that security and seeing whether it is trading below that value. It also invests in merger arbitrage securities and stocks and bonds of distressed companies.

Under normal circumstances, fund managers will spread the fund’s assets across companies from at least five different countries. It can also invest up to 20% of its assets in instruments issued by companies located in the US, Middle East, emerging markets, and other regions.

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The fund’s assets were spread across 81 holdings (including stocks, bonds, and currencies) in September 2016, and it was managing assets worth $2.5 billion. According its quarterly holdings report for September, its equity holdings included Nokia Oyj (NOK), Deutsche Telekom AG (DTEGY), XL Group plc (XL), Volkswagen AG (VLKAY), and GlaxoSmithKline plc (GSK).

Portfolio changes in the Franklin Mutual European Fund

The financials sector is still the biggest sectoral holding of TEMIX, with industrials coming in a close second. Consumer discretionary completes the top three invested sectors, which combine to form a little over half of the overall portfolio. Telecom services finds a large portion of the portfolio invested in it. Materials also form a much larger portion than the fund’s peers in this review.

We’ve looked at the fund’s quarterly portfolios for the past three years until September 2016. Although financials continues to be the most-invested sector, exposure to it has been brought down significantly.

Intraperiod, stocks from the sector had comprised a third of the total assets, which is now down to less than 20%. So far, 2016 has seen most of the reduction in the portfolio weight of financials. Compared to three years ago, industrials has maintained its portfolio weight. However, it had declined intraperiod and has been pumped back up in the past year.

Among the consumer-focused sectors, fund management likes discretionary more than staples. Meanwhile, affinity toward healthcare stocks has increased in the past six months.

From a year ago, exposure to assets invested in bonds has reduced, but exposure to cash is fairly high.

In the next article, let’s see what has impacted performance of the Franklin Mutual European Fund – Class A (TEMIX) in YTD 2016.


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