Franklin Templeton, one of the largest and most well recognized asset management firms in the United States, has recently made an extremely bold move. The company has bought $5 billion dollars worth of Ukrainian debt, which amounts to nearly one fifth of Ukraine’s total bonds.
Those that follow capital markets and investments are describing the purchase as a risky and unstable. Ukraine is not without its many current financial faults. Suffering from a weak economy and a hefty budget deficit, investing in the hope that the country will have a bright financial future seems quite precarious. However, when one analyzes Franklin Templeton’s past financial moves in terms of procurement of a country’s debt, one will notice that they have been extremely successful.
In 2011, Michael Hasenstab became a household name in Ireland after purchasing a €8.5 billion holding of Irish bonds. The strategy on behalf of one of the most successful fund managers in the world could not have come at a better time for Ireland. With widespread market panic, soaring yields, and an uneasy economic environment, Ireland was in dire need of help. However, the decision to invest in Ireland did not come quickly or easy for Hasenstab, as many are lead to assume. As Hasenstab stated, “We had been looking at Ireland quite intensely for close to a year before we actually made our investment. What really attracted us on the economic side, and still attracts us, was the very competitive economic fundamentals.” The efforts and analytics put in by Franklin Templeton have certainly paid off, and a great deal at that. Not only has the firm effectively provided the Irish market with a savior, but it has personally reaped a quality investment. Since the investment, the Irish bond yields have fallen as low as 4 per cent. In essence, Franklin Templeton’s risky financial move has provided the firm with bonds now worth billions of euros of paper gains.
There is no doubt that Franklin Templeton has employed in its purchase of Ukrainian debt the same aggressive and confident strategy that it has so expertly executed in the case of Irish bonds. Despite the ongoing trepidation of bankers and investors that are watching the Ukrainian economic crisis, Franklin Templeton’s move is not without strong reasoning and timely analytics. The firm knew exactly what it was doing in the Irish crisis, and it is aware of its tactics now. Once again, those that are bold, aggressive, confident, and highly analytical financial asset managers have wonderfully gained massive rewards that leave the rest of us in awe.
*Note: The author, Eden Cohen nor the magazines have an interest in Franklin Templeton