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Franklin Reduces Beta

Franklin Templeton Investments is moving to take some risk off the table in its high-yield positions, specifically among its holdings in the utility sector.

Franklin Templeton Investments is moving to take some risk off the table in its high-yield positions, specifically among its holdings in the utility sector. Eric Takaha, director of $13 billion in high yield, said Franklin Templeton's dedicated institutional high-yield fund is upgrading its utility exposure. "We are close to even-weighted versus our benchmark and have moved to reduce the beta," he sad. Takaha added utilities account for the single-largest sector exposure and because the sector contains a fair amount of fallen angels, Franklin Templeton can increase its quality without having too much of a detriment on yields. He declined to discuss specific credits. The institutional high-yield fund is measured against the Credit Suisse First Boston High-Yield Index; utilities account for 11% in the fund, which is roughly flat to their level in the benchmark.

Elsewhere, the fund is overweight industrials on the view credits in the sector remain attractive despite signs economic growth is slowing. "It's a positive overall scenario," Takaha said. He is slightly overweight industrials with a high single-digit exposure, compared to the index's mid-to-high single-digit allocation.

Another large position in the fund is the media sector, which accounts for 10% or slightly higher. Takaha stressed the fund's strategy is to make calls on a bottom-up basis and then on a broader, sector view. It does not tend to make interest-rate calls by playing with duration.

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