The Wealth 150 is a selection of funds across the major sectors which we believe have excellent long-term prospects and competitive ongoing management charges. In recent years the cost of investing has generally been driven down and we have worked hard to ensure Hargreaves Lansdown clients can access the best fund managers at the best prices.
In this environment the Templeton Global Bond Fund, with an ongoing charge of 1%, has come to look expensive and we do not believe the overall proposition should command such a high fee. We regularly review the performance potential and value for money Wealth 150 funds offer. We worked hard to negotiate more appropriate fees with Templeton, but on this occasion a suitable fee could not be agreed.
We have therefore taken the decision to remove the fund from the Wealth 150.
Our view on this fund
We view this as a higher-risk, higher-return global bond fund. While the managers have the flexibility to adopt a 'go anywhere' approach and invest worldwide, they have retained a bias to emerging markets. This means the fund has tended to perform well when emerging markets have been in favour and vice versa. Overall, the fund has delivered good returns, but with higher volatility than other global bond funds.
Michael Hasenstab and his team continue to find the best opportunities among bonds issued by emerging market governments, and within emerging market currencies. They are willing to tolerate potentially significant volatility over shorter periods, as long as they believe bond issuers will ultimately meet their obligations to bond holders and not default on their debts. The fund is therefore likely to retain its bias to emerging markets.
For investors seeking exposure to emerging bond and currency markets; who are comfortable with the higher-risk approach; and are prepared to pay the higher fees, we do not believe any changes to a portfolio are required providing its objectives continue to be met.
While yields on emerging market debt have increased of late (meaning prices have fallen) and valuations have improved, this area of the market still needs to be approached with a certain amount of caution. Indeed, with bond yields globally still low relative to history we are taking a more cautious stance on bonds across the board. We retain a preference for cautiously-managed, go-anywhere 'strategic' bond funds, where we have faith in the fund managers to use the flexibility afforded to them to preserve capital and pounce on opportunities when they arise.