Franklin India Feeder - Franklin U.S. Opportunities Fund is an open-end scheme investing overseas. The fund invests predominantly in units of Franklin U. S. Opportunities Fund, an overseas Franklin Templeton mutual fund, which primarily invests in securities in the United States of America.
Morningstar’s fund analyst Oliver Kettlewell looks at the underlying fund.
Franklin U.S. Opportunities continues to deliver what we’d expect from a high-growth fund. We think highly of fund manager Grant Bowers. Based with Franklin his whole career, he started with the firm’s fixed-income group in 1993 before becoming an equity analyst with a focus on growth-orientated industries such as media. Bowers’ lengthy tenure should help him thoroughly understand the strengths and weaknesses of the 30-plus equity analysts at his disposal.
The process is typical for a growth strategy, with the manager seeking firms with sustainable earnings, a quality balance sheet and a decent valuation. However, certain facets of its execution stand out. For example, the growth mandate allows Bowers a degree of flexibility with share price valuations being allowed to run, as evidenced by the fund’s lofty price/earnings ratio, which is higher than the peer group and Russell 3000 Growth index.
The growth tilt is also prominent in terms of sectors with large stakes in typical growth industries such as technology and offsetting minimal exposure to the low-growth sectors of utilities and consumer staples. In terms of the portfolio’s market-cap exposure, the holdings continue to range from large- to small-cap companies, reflecting the manager’s freedom to scour up and down the market-cap ladder where he sees opportunities.
The only harness to the flexibility is that the manager applies a risk-aware approach to portfolio construction by placing higher weights on larger-cap stocks to reflect their higher liquidity and lower volatility.
Bowers’ all-cap approach has seen him comfortably outpace the Morningstar U.S. all-cap and growth categories since he took charge in January 2009 through May 2013. Bowers also outperforms over a longer time frame since March 2007 with a Luxembourg-listed fund run in the same manner. Stock selection in the important growth sector of technology is where the manager has added most value during his tenure, which is particularly pleasing given its prominence in the index.
We reaffirm our Bronze rating for the fund.
Oliver Kettlewell is a fund analyst with Morningstar OBSR. His analysis initially appeared on Morningstar UK.
