Franklin Templeton Investments has proposed mergers for two Franklin Bissett funds and one Templeton fund.
On May 20, Franklin Templeton announced that, subject to shareholder approval, it plans to merge the following funds on or around August 12, 2016:
- Franklin Bissett Strategic Income Fund into the Franklin Bissett Monthly Income and Growth Fund
- Franklin Bissett Strategic Income Corporate Class into the Franklin Bissett Monthly Income and Growth Fund
- Templeton BRIC Corporate Class into the Templeton Emerging Markets Fund
The company says it is merging the Franklin Bissett funds because the dissolution of the Canadian income trust market in 2010 resulted in a dearth of high dividend paying stocks outside of the energy and financial industries. "This, in turn, has narrowed the opportunity set for the terminating funds and contributed to increased volatility," reads the statement. "The continuing fund provides exposure to a broader opportunity set (including geographically and sector diversified equity and fixed income), employing different strategies for income and growth to help reduce performance volatility."
BRIC economies underperforming
As for the reasons behind the Templeton fund merger, the manager notes that the Brazilian, Russian, Indian and Chinese (BRIC) economies have been underperforming the broader emerging market asset class with higher volatility, while ease of entry into other emerging markets has improved. "The continuing fund provides exposure to a wider opportunity set, offering a more balanced and comprehensive approach to emerging markets investing," says Franklin Templeton.
A joint management information circular describing the merger considerations and rationale will be mailed to investors in mid July and they will have an opportunity to vote at special meetings scheduled for August 5 in Toronto. Franklin Templeton notes that each continuing fund has lower a management expense ratio (MER) than the corresponding terminating fund.
