February 4, 2015 / 1:36 PM / 5 years ago

Templeton Global Bond Fund takes big hit from Ukraine holdings

(Reuters) - The Templeton Global Bond Fund, one of the biggest investors in Ukraine bonds, weathered a 29 percent hit to the market value of its holdings in the worn-torn country’s debt during the fourth quarter.

The market value of the fund’s Ukraine bonds fell to $1.8 billion at the end of December, down from $2.53 billion at the end of the third quarter, according to the fund’s latest holdings disclosure.

However, Michael Hasenstab, portfolio manager of the $69 billion fund, maintained all of his positions in the Ukraine debt issues, despite falling bond prices and constant turmoil in the country.

The fund, for example, kept its largest position in a Ukraine bond that matures in July 2017, even though its market value dropped 30 percent to $435.5 million in the fourth quarter. And since the end of 2014, that bond, which carries a 9.25 percent coupon rate, has dropped to about 52 cents on the dollar from 62 cents on the dollar, according to Thomson Reuters data. The yield on the bond has surged to more than 40 percent as bond prices move inversely to yields.

Still, Hasenstab’s fund, which is known for taking big, contrarian bets in places like Hungary and Ireland, has generated a total return of 5.28 percent over the past 12 months, according to Morningstar Inc data. That performance beats 75 percent of peer funds, according to Morningstar.

More than 5,000 people have been killed in the conflict between Russian-backed separatists and government forces, of which Ukrainian media estimate more than 1,500 are Ukrainian soldiers.

Reporting By Tim McLaughlin; Editing by Meredith Mazzilli

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