--Hasenstab's fund lured new money in February, breaking three-month drought
--Hasenstab buys short-dated Asian debt, avoids longer maturities
--Hasenstab also likes Poland
--In euro-zone bond market, Hasenstab holds only Irish bonds.
--Hasenstab sees further declines in dollar, euro, yen vs emerging-market currencies in era of slack monetary policy
NEW YORK (Dow Jones)--After getting burned in 2011, Franklin Templeton's star bond-fund manager Michael Hasenstab has turned his performance around and is again drawing investors to his door.
Hasenstab's $61.6 billion U.S.-incorporated Templeton Global Bond Fund (TPINX), which has posted a year-to-date gain of 8%, lured $461.6 million in new cash in February, after suffering a total of $1.85 billion in outflows over the previous three months, according to data provided by fund-tracker Morningstar Inc.
The fresh intake was a confidence booster for Hasenstab, whose bullish bets on emerging-market assets were roiled by the euro zone's sovereign-debt crisis during the second half of 2011. Last year, his fund handed investors a loss of 2.37% and slipped to nearly the bottom among its peers, after posting gains of 18.9% and 12.7%, respectively, in 2009 and 2010.
Unlike many fund managers who rushed out of emerging markets late last year, Hasenstab stocked up his holdings at cheaper levels while skeptical clients cashed out. The bold strategy reflected his belief that policy makers wouldn't allow the euro zone's crisis to spin out of control, the U.S. wouldn't be hit with another recession, and China's economy might slow down but a sharp downfall was unlikely.
"Despite short-term volatility, we see our job as really being to cut through the noise, and try and take advantage of the market dislocations such noise creates," Hasenstab said in an interview late Tuesday afternoon. "Our performance so far this year reflects this."
The fund's 8% gain so far in 2012 is well above the average of 1.85% for the 117 funds Lipper tracks and the 0.93% loss posted by its benchmark index, the Citigroup World Government Bond Index.
The 38-year-old Hasenstab, who is based in San Mateo, Calif., has been described by some as the next-generation Bill Gross, the legendary bond manager who runs the world's biggest fixed-income fund at Pacific Investment Management Co.
Hasenstab shot to fame in 2008, when his fund took in $2.66 billion and then continued to draw investors. Even after the redemptions in the last two months of 2011, the fund took in a net gain of $1.3 billion last year, accounting for nearly 60% of all new cash flowing into the world bond category tracked by Morningstar.
With the scenario of a euro-crisis-fueled pandemic fading, investors this year have flushed out of safe assets such as Treasury bonds and sought higher returns from U.S. stocks, corporate bonds and emerging-market assets. Bond yields in Italy and Spain have tumbled to less-stressed levels and U.S. stock indices have rallied to their highest since 2008. That has played to the advantage of Hasenstab, whose risk-oriented portfolio was well positioned for the rebound.
"To the credit of the large asset managers like Templeton, they have used the recent euro crisis and uncertainty surrounding growth as an opportunity to get into the Asian and emerging-market space earlier than most," said Adrian K. Miller, senior global market strategist at GMP Securities LLC in New York.
The danger is if the global economic recovery falters again, the fund could struggle against its rivals, said Miriam Sjoblom, a bond fund analyst with Morningstar who tracks Hasenstab's portfolio. But she added that last year's poor performance didn't put a dent in Hasenstab's credibility.
"It showcases the potential risks of his long-term, contrarian approach, so it's an instructive period for investors. But we continue to give the fund an analyst rating of gold," she said.
Hasenstab is heavily invested in short-dated bonds from South Korea, Malaysia, Australia and other countries whose fortunes are tied to those of the China. He said he avoids long-dated bonds to limit interest-rate risk and to best capture gains in these and other countries' currencies against the dollar, euro and yen--a trio for which he sees further declines against emerging-market currencies due to comparatively slack monetary policy in the U.S., Europe and Japan.
Meanwhile, he likes Poland. In the euro-zone bond market, he holds only Irish bonds.
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