Brant Smith, portfolio manager of Franklin Templeton’s Quotential program did a presentation to financial advisors last week. The Quotentail Program is Templeton’s flagship product and they market it aggressively. The reason is simple: Quotential is a fund of funds, so while star fund managers may come and go, Quotential is here to stay with Templeton. Makes perfect sense since Templeton is a marketing company just like the other big investment companies like CI, Mackenzie or AGF.
Most Quotential programs underperformed their respective indices and peers in 2008. At the presentation in Toronto the portfolio manager of the program, Brant Smith, got some tough questions regarding Quotential’s underperformance in that year. He responded the best he could without bashing Templeton’s corporate management, saying that he has a broader range of tools available in his toolkit since 2009, which in his view explains the 2009 outperformance.
What does he mean? It has been difficult for Quotential to quickly dump underlying fund assets in a quickly changing market like what we had in 2008. Dumping fund assets in favour of cash would put pressure on the underlying fund to sell of in a potentially declining market thus hurting the fund manager’s performance and unit holder’s return. After some extended internal fighting and show down Quotential now has the following tools to continue with an improved performance going forward:
- Ability to buy ETFs (can be dumped very quickly for cash as it is a liquid market and not a Templeton fund)
- Enlisted Acuity to manage part of the Canadian component of the Quotential portfolio (addition to Canadian expertise was badly needed in the Templeton lineup)
- Enlisted an offshore portfolio management company out of Luxembourg to manage geographic specific regions (allows Brant Smith to target specific regions for investments)
- Hedging for the Templeton Global Bond fund was instituted (expecting a long-term decline of the US$)
More available tools a portfolio managers has, the better performance he or she could produce for investors. Brant seem like a common sense, humble guy who knows his trade. There will be better years ahead for the Quotential program.
