K2 - An Alternative for Navigating Volatile Markets
As investors, financial markets have been kind to us in recent years. We've seen steady growth in most economies, and positive fundamentals can still be found in many markets. But this could all change in the months and years ahead – markets are seeing increased volatility, populist governments are taking power and a trade war is brewing between the United States and China.
The full impact of these issues is currently unknown, so what might help to position your investments for unpredictable financial market?
When an investment falls in value, it can take a large rise in the share price to overcome the initial loss. If a stock, for example, loses just 1%, it only needs to appreciate by 1.01% to recover all the value it has lost. That doesn't sound like much, but a loss of 20% will require a much higher return of 25%. And a 50% loss - the kind seen during the 2008 to 2009 recession - requires an eye-watering 100% just to get back to even.
One of the key aspects of the Franklin K2 Alternative Strategies Fund is that is that it has a record of helping manage the risk during those periods when stocks are falling in value. During the MSCI World Index's ten worst trading days since the fund was launched in September 2014, the fund only participated in a little over a quarter of the benchmark's decline.
See How the Fund Performed During Major Market Events1:
- Franklin K2 Alternative Strategies Fund A (acc) USD
- MSCI World Index
Past performance is not an indicator or a guarantee of future performance.
Franklin K2 Alternative Strategies Fund*
A multi-strategy fund that gives you exposure to four distinct hedge strategies.
Franklin K2 Long Short Credit Fund*
A fund leveraging a diversified credit strategy to hedge against interest rate and credit-related risks.
Franklin K2 Global Macro Opportunities Fund*
A fund that pursues macro trends and pricing opportunities across the globe.
Franklin K2 Alternative Strategies Fund*
Add to your traditional portfolio for:
- lower volatility
- reduced correlation with stocks and bonds
Franklin K2 Long Short Credit Fund*
Add to your traditional bond portfolio for:
- reduced risk
- better downside protection
Franklin K2 Global Macro Opportunities Fund*
Add to your traditional stock portfolio for:
- improved diversification
- reduced risk with minimal impact to returns
Franklin K2 Alternative Strategies Fund*
Invests across four hedge strategies, always adjusting to changing market conditions.
Target allocations**:
Franklin K2 Long Short Credit Fund*
Offers a multi-sector credit diversification with three complementing hedge strategies
Target allocations**:
Franklin K2 Global Macro Opportunities Fund*
Leverages two distinct approaches to global macro hedge strategies.
Target allocations**:
Franklin K2 Alternative Strategies Fund*
- Offers alternative sources of returns
- Provides equity downside protection
Franklin K2 Long Short Credit Fund*
- Provides investors with additional sources of returns
- Reduces correlations to traditional fixed income markets
Franklin K2 Global Macro Opportunities Fund*
- Pursues more consistent portfolio returns
- Seeks to limit the impact of negative events on equity markets
Franklin K2 Alternative Strategies Fund
The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund seeks to achieve its targeted investment objective by allocating its assets across multiple “alternative” strategies and by investing in a wide range of assets. Such assets and investment instruments have historically been subject to price movements due to such factors as general stock market volatility, sudden changes in interest rates, or fluctuations in commodity prices. The Fund will seek to limit volatility using hedged strategies. As a result, the performance of the Fund can fluctuate moderately over time. Credit risk: the risk of loss arising from default that may occur if an issuer fails to make principal or interest payments when due. This risk is higher if the Fund holds low-rated, non-investment-grade securities. Currency risk: the risk of loss arising from exchange-rate fluctuations or due to exchange control regulations. Derivatives risk: the risk of loss in an instrument where a small change in the value of the underlying investment may have a larger impact on the value of such instrument. Derivatives may involve additional liquidity, credit and counterparty risks. Liquidity risk: the risk that arises when adverse market conditions affect the ability to sell assets when necessary. Reduced liquidity may have a negative impact on the price of the assets. Operational risk: the risk of losses resulting from errors or failures arising from the people, systems, service providers or processes upon which the Fund depends. Targeted return risk: there is no guarantee that the Fund will achieve its targeted objective. The Fund seeks to achieve its returns over a full market cycle to achieve a positive return. Capital invested in the Fund may decline in value. For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
Other significant risks include: credit risk, derivatives risk, liquidity risk, operational risk, targeted return risk. For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
Franklin K2 Long Short Credit Fund
The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested.
Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund seeks to achieve total return over a full market cycle by allocating its assets across multiple “alternative” Long/Short strategies and by investing in a wide range of assets, with the ability to actively use financial derivative instruments. Such securities and investment instruments have historically been subject to price movements due to such factors as sudden changes in interest rates, changes in the financial outlook or perceived credit worthiness of securities issuers, or fluctuations in currency markets. As a result, the performance of the Fund can fluctuate moderately over time. Counterparty risk: the risk of failure of financial institutions or agents (when serving as a counterparty to financial contracts) to perform their obligations, whether due to insolvency, bankruptcy or other causes. Credit risk: the risk of loss arising from default that may occur if an issuer fails to make principal or interest payments when due. This risk is higher if the Fund holds low-rated, non-investment-grade securities. Currency risk: the risk of loss arising from exchange-rate fluctuations or due to exchange control regulations. Derivatives risk: the risk of loss in an instrument where a small change in the value of the underlying investment may have a larger impact on the value of such instrument. Derivatives may involve additional liquidity, credit and counterparty risks. Emerging markets risk: the risk related to investing in countries that have less developed political, economic, legal and regulatory systems, and that may be impacted by political/economic instability, lack of liquidity or transparency, or safekeeping issues. Liquidity risk: the risk that arises when adverse market conditions affect the ability to sell assets when necessary. Reduced liquidity may have a negative impact on the price of the assets. Operational risk: the risk of losses resulting from errors or failures arising from the people, systems, service providers or processes upon which the Fund depends.
For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
Other significant risks include: counterparty risk, credit risk, currency risk, derivatives risk, emerging markets risk, liquidity risk, operational risk. For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
Franklin K2 Global Macro Opportunities Fund
The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund seeks to achieve total return over a full market cycle by allocating its assets across multiple “alternative” macro-oriented strategies and by investing in a wide range of assets, with the ability to actively use financial derivative instruments. Such assets and investment instruments have historically been subject to price movements due to such factors as general stock market volatility, sudden changes in interest rates, or fluctuations in commodity prices. As a result, the performance of the Fund can fluctuate moderately over time. Credit risk: the risk of loss arising from default that may occur if an issuer fails to make principal or interest payments when due. This risk is higher if the Fund holds low-rated, non-investment-grade securities. Currency risk: the risk of loss arising from exchange-rate fluctuations or due to exchange control regulations. Derivatives risk: the risk of loss in an instrument where a small change in the value of the underlying investment may have a larger impact on the value of such instrument. Derivatives may involve additional liquidity, credit and counterparty risks.
Liquidity risk: the risk that arises when adverse market conditions affect the ability to sell assets when necessary. Reduced liquidity may have a negative impact on the price of the assets.
Operational risk: the risk of losses resulting from errors or failures arising from the people, systems, service providers or processes upon which the Fund depends. Targeted return risk: there is no guarantee that the Fund will achieve its targeted objective. The Fund seeks to achieve its returns over a full market cycle to achieve a positive return. Capital invested in the Fund may decline in value.
For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
Other significant risks include: credit risk, currency risk, derivatives risk, operational risk, targeted return risk, liquidity risk. For full details of all of the risks applicable to this Fund, please refer to the “Risk Considerations” section of the Fund in the current prospectus of Franklin Templeton Investment Funds.
* Sub-funds of the Luxembourg-domiciled SICAV Franklin Templeton Investment Funds
** Target Allocations reflect end of period target allocations. The Fund may shift allocations among strategies at any time. Further, K2 may determine in its sole discretion to not allocate to one or more of the strategies and/or to add new strategies. Accordingly the above target allocations are presented for illustrative purposes only, and should not be viewed as predictive of the ongoing composition of the fund’s portfolio (and its managers), which may change at any time.
Weightings as percent of invested capital into fund managers (sub-advisors or co-managers). Percentage may not total 100% due to rounding. Manager allocation includes managers that have been appointed as sub-advisors or managers of investment funds. K2 may determine in its sole discretion not to allocate to one or more of the managers and/or to add new managers. Accordingly, the manager allocation is presented for illustrative purposes only, and should not be viewed as predictive of the ongoing composition of the Fund's portfolio, which may change at any time.
Financial markets are always changing. You may benefit from an investment strategy that can react quickly when the facts on the ground change. The Franklin K2 Alternative Strategies Fund invests in a number of different hedge strategies, which we explain in greater detail below. Using a number of different approaches helps us adjust the fund's strategy to take advantage of opportunities, manage risks, and generally create what we believe is the right investment mix for the prevalent financial-market conditions.
This flexibility gives investors exposure to four distinct hedge strategies:
Long Short Equity
Makes long and short investments in common stocks and indices*
Relative Value
Intended to profit from pricing inefficiencies.
Event Driven
Invests in securities of companies undergoing corporate events.
Global Macro
Focuses on macroeconomic opportunities.
Adopting to changing market conditions:
Strong Financial Market
Companies actively participate in relative value and long/short opportunities.
Global Financial Downturn
Companies may become cash conscious, resulting in fewer mergers and acquisitions and event driven opportunities.
Market Recovery
As markets stabilize, event-driven opportunities often re-emerge.
Strong Financial Market
Companies actively participate in relative value and long/short opportunities.
Global Financial Downturn
Companies may become cash conscious, resulting in fewer mergers and acquisitions and event driven opportunities.
Market Recovery
As markets stabilize, event-driven opportunities often re-emerge.
Hypothetical investment scenario only. For illustrative purposes only. Actual allocations may vary.
Download Investor’s Guide* Long/short equity is an investing strategy that takes long positions in stocks that are expected to appreciate and short positions in stocks that are expected to decline. A long/short equity strategy seeks to minimize market exposure, while profiting from stock gains in the long positions, along with price declines in the short positions.
Investing some of your money in hedge fund strategies may help reduce risk and increase return potential. Hedge-strategy managers can manage both opportunities and risk, which has historically led to a better balance of risk and return than a broad range of global equity and bond markets.
20-Year Period Ending 31 March 20192
- Hedge Fund
- Equity
- Fixed Income
Past performance is not an indicator or a guarantee of future performance.
For illustrative purposes only; not representative of any Franklin Templeton or K2 Fund performance or portfolio composition.
Download Investor's GuideFranklin K2 Liquid Alternative Funds† provides you with a different source of return by investing in a variety of hedge fund managers, whose hedge strategies we package in a familiar mutual-fund format. Hedge strategies have the potential to reduce the impact of volatility on your investments. And that means you may be able to keep more of your money when stock and bond prices are declining.
Franklin K2 Alternative Strategies Fund A (acc) USD
Past performance is not an indicator or a guarantee of future performance.
The value of shares in the Fund and income received from it can go down as well as up, and investors may not get back the full amount invested. Performance details provided are in share class currency, include the reinvested dividends gross of basic rate tax and are net of management fees. Sales charges and other commissions, other taxes and relevant costs to be paid by an investor are not included in the calculations. Performance may also be affected by currency fluctuations.
K2 Advisors* - A Trusted, Experienced Investment Partner
Franklin K2 Alternative Strategies Fund is advised by K2 Advisors, an organization with 24+ years' experience in hedge fund investing. Over its history, K2 has grown into one of the largest advisors of multi-manager portfolios, offering a range of alternative solutions to its client base.
- $10.7 billion in assets under management (AUM)
- Investments in approximately 80 managers across the full spectrum of hedge fund strategies
- A pioneer in obtaining transparent holdings information from hedge strategies
- 44 investment professionals worldwide
- The ability to assist clients in all aspects of hedge fund investing
- A global presence with personnel in the United States, the United Kingdom, Japan, Australia, and Hong Kong
* As of 1/4/2019
Get Started with Franklin K2 Liquid Alternative Funds
Work with your financial advisor to fully capture the potential of new sources of return through hedged strategies. Together you can decide how best to incorporate these strategies into your portfolio.
