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Templeton Global Bond Hit by its Ukraine Holdings

$69 billion Templeton Global Bond Fund, managed by Michael Hasenstab is one of the biggest investors in Ukraine bonds, with $2.53 billion at the end of 3rd quarter 2014, fell 29% to only $1.8 billion at the end of December 2014.  However, Michael Hasenstab stood his stand to maintain all of his positions in Ukraine debt issues despite falling bond prices and constant turmoil in the country.

The fund, for example, kept its largest position in a Ukraine bond that matures in July 2017, even though its market value dropped 30% to $435.5 million in the fourth quarter.  And since the end of 2014, that bond, which carries a 9.25% coupon rate, has dropped to about 52 cents on the dollar from 62 cents on the dollar.  The yield on the bond has surged to more than 40% as bond prices move inversely to yields. 

Michael Hasenstab is known for taking big, contrarian bets in places like Hungary and Ireland, has generated a total return of 5.28% over the past 12 months beating 75% of peer funds.

Source: 

Reuters, Tim McLaughlin, 2015-02-04, “Templeton Global Bond Fund Takes Big Hit From Ukraine Holdings”