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Best Performing Franklin Templeton Mutual Funds in 3Q2015

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Franklin Resources, also popular as Franklin Templeton Investments, posted a negative earnings surprise of 24.4% in fiscal fourth-quarter 2015. Earnings per share of 59 cents were also down from $1.02 in the year-ago quarter. Moreover, lower investment management, sales and distribution, and shareholder servicing fees dragged down revenues.

This is crucial, as Franklin Templeton is a leader in asset management with presence in over 150 countries. As for the mutual funds, Franklin Templeton could put up a modest show in the tough third quarter. Franklin Real Estate Sec R6 (FSERX) was the best gainer among the Franklin Templeton mutual funds, which gained only 3.4%. The biggest loser was Franklin Natural Resources C (FNCRX), down by 23.5% in the third quarter.

Franklin Templeton vs. Other Fund Families

In the third quarter, the 3.4% gain was modest, and could beat fund families like American Funds and BlackRock. However, gains for these fund families were also paltry. From the American Funds stable, American Funds US Govt Sec R5 ( RGVFX) was the best performer with timid gains of 1.7%. BlackRock’s best performer was Blackrock US Real Estate Sec Str I (BIREX), which gained 2.4%. What is similar between BlackRock and Franklin Templeton is that both their top gainers are from Real Estate fund category.

However, Franklin Templeton’s best gainer in the third quarter failed to beat key players likeVanguard, Fidelity and T. Rowe Price . In a quarter ravaged by headwinds, mutual funds from the Vanguard Group gave a decent performance. Its best gain hit 8.4%, achieved by Vanguard Extended Duration Treasury Index Fund Institutional ( VEDTX).

Separately, Fidelity’s top-gainer, Fidelity Spartan Long Treas Adv (FLBAX), could post only 5.5% return. In fact, except for this fund’s Investor class fund, Fidelity Spartan Long Treas Inv (FLBIX), there was no other that managed a 5% plus gain. For T. Rowe Price, T. Rowe Price US Treasury Long-Term (PRULX) gained 5.1% and was the best performer. However, it was the only fund within the 180 T. Rowe Price assortment we studied to post a 5% plus return.

Keep reading our Mutual Fund Commentary section, where we are reporting on performances and best picks from fund families and varied categories.

Franklin Templeton’s Performance in Q3 vs. Q2

Out of the 329 funds we studied, 101 funds managed to finish in the green. The average gain for these 101 funds was 1.2%. Only 12 funds gained by at least 2%, while 44 funds finished with sub 1% gain. In the second quarter, 104 funds out of 331 had finished in the positive territory. The average gain for these funds was nearly 1.7%.

In the third quarter, 228 funds ended in the negative zone. The average loss for these 228 funds was 9%. In the second quarter, the average loss for 227 funds was 1.4%.

Quarterly Results

Coming back to Franklin’s quarterly results, investment management fees decreased 12% year over year to $1.26 billion, while sales and distribution fees declined 19% year over year to $510.6 million.

As of Sep 30, 2015, total AUM was $770.9 billion, down from $898 billion as of Sep 30, 2014. Notably, the quarter recorded net new outflows of $28.6 billion, market depreciation of $61.2 billion and a $4.6 billion decrease that resulted from a decline in foreign exchange revaluation. Simple monthly average AUM of $824.5 billion decreased 10% year over year.

Notably, AUM was down 14% during fiscal 2015, mainly resulting from $57.9 billion of market depreciation, $48.8 billion of net new outflows and a $15.1 billion decline from foreign exchange revaluation.

Top 15 Franklin Templeton Funds in Q3

Below we present the top 15 Franklin Templeton funds with best returns in 3Q2015:

Fund Name

Objective Description

Q3 Total Return

Q3 % Rank vs Obj

YTD Total Return

% Yield

Expense Ratio

Beta vs S&P 500

Load

Franklin Real Estate Sec A

Real Est

3.23

3

-3.25

1.39

0.99

0.57

Y

Franklin Utilities A

Utilities

2.34

7

-7.47

2.76

0.74

0.72

Y

Franklin California H/Y Muni A

Muni CA

2.15

5

2.76

3.89

0.63

0.05

Y

Franklin California Tx-Fr Inc A

Muni CA

1.82

23

1.5

3.83

0.58

0.03

Y

Franklin MA Ins Tax-Free A

Muni State

1.63

16

1.2

3.29

0.67

-0.01

Y

Franklin Federal Interm T/F A

Muni Natl

1.61

17

1.39

2.46

0.68

-0.03

Y

Franklin NY Interm Tax-Free A

Muni NY

1.53

29

1.85

2.59

0.66

-0.04

Y

Franklin Ohio Ins Tax-Free Inc A

Muni State

1.51

27

1.95

3.42

0.63

-0.02

Y

Franklin CA Interm Tax-Free Inc A

Muni CA

1.46

65

1.37

2.77

0.63

 

Y

Franklin Oregon Tax-Free Inc A

Muni State

1.42

39

1.16

3.57

0.63

0.03

Y

Franklin Federal Interm T/F C

Muni Natl

1.39

36

0.97

1.85

1.23

-0.03

N

Franklin MN Ins Tax-Free Inc A

Muni State

1.36

47

1.43

3.05

0.65

-0.02

Y

Franklin Georgia Tax-Free Inc A

Muni State

1.34

49

1.27

3.5

0.67

0.03

Y

Franklin Federal Tax-Free Inc A

Muni Natl

1.28

46

1.2

3.6

0.62

 

Y

Franklin High Yld Tax-Free Inc A

Muni Natl

1.27

47

1.1

4.12

0.65

0.04

Y

Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded.
Q3 % Rank vs Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst.

Many sub Municipal fund categories, such as Muni California Long, Muni Pennsylvania and Muni New York Long, featured in the top performers’ list for the third quarter. However, the gains were modest, with Muni California Long performing the best, notching up a 1.7% gain in the quarter.

The Municipal fund category’s quarterly performance was prominent in the list of the best 15 Franklin Templeton mutual fund gainers. Thirteen funds belonged to Municipal funds category, with Muni California Long taking the lead in terms of percentage gain.

Franklin California H/Y Muni A (FCAMX - Free Report) and Franklin California Tx-Fr Inc A ( (FKTFX - Free Report) gained 2.2% and 1.8%, respectively, and were ranked third and fourth in the list of the 15 toppers. Both these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Also, Franklin CA Interm Tax-Free Inc A (FKCIX - Free Report) featured in the list, which however carries a Zacks Mutual Fund Rank #3 (Hold) .

Among Municipal funds carrying a favorable Zacks Mutual Fund Rank, Franklin NY Interm Tax-Free A (FKNIX - Free Report) and Franklin Ohio Ins Tax-Free Inc A (FTOIX - Free Report) each gained 1.5% and both carry a Zacks Mutual Fund Rank #2 (Buy). Meanwhile, other Municipal funds such as Franklin MA Ins Tax-Free A (FMISX - Free Report) , Franklin Federal Interm T/F A (FKITX - Free Report) , Franklin Oregon Tax-Free Inc A (FRORX - Free Report) , Franklin Federal Interm T/F C (FCITX - Free Report) and Franklin MN Ins Tax-Free Inc A (FMINX) carry a Zacks Mutual Fund Rank #3 (Hold).

However, the bottom three funds in this list of 15 gainers, Franklin Georgia Tax-Free Inc A (FTGAX), Franklin Federal Tax-Free Inc A (FKTIX) and Franklin High Yld Tax-Free Inc A (FRHIX) hold a Zacks Mutual Fund Rank #4 (Sell).

As for the top two gainers, they belong to the Real Estate and Utilities categories. According to Morningstar data, Real Estate was also in the top list of fund category performers, as it returned nearly 1.4% in the third quarter. Franklin Real Estate Sec A ( FREEX) gained 3.2% and led the top performers’ list.

Separately, the second-best gainer Franklin Utilities A (FKUTX) was a somewhat surprise inclusion, as the Utilities funds category had ended third quarter with 3.7% loss. FKUTX gained 2.3% in the quarter, significantly outperforming the broader sector’s gain. Perhaps, the fund benefitted from the Federal Reserve’s decision to delay the rate hike in September. Both FREEX and FKUTX are Buy rated.

However, except for FCITX, all other funds carry a sales load. It is always best to get the most out of one’s invested capital, and funds carrying no sales load should be the best option on that note. In the third quarter, the list of best-gaining mutual funds for the quarter is dominated by no load mutual funds .

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