Hasenstab Says More ‘Excited About Ukraine’ Than a Year Ago

May 22, 2014 10:38 am ET

(Updates with details on Templeton fund in third paragraph.)

May 22 (Bloomberg) -- Michael Hasenstab, who manages the $70.1 billion Templeton Global Bond Fund at Franklin Resources Inc., said he is “more excited” about the prospects for Ukraine than he was a year ago.

“The transition government has done an exceptional job making tough reforms,” said Hasenstab, speaking at San Mateo, California-based Franklin’s Investor Day.

Hasenstab, the top-ranked fixed income manager known for making contrarian bets on nations including Ireland and Hungary, boosted his wager on Ukraine in the first quarter to $7.6 billion. Franklin is the the world’s largest mutual-fund investor in offshore debt from Ukraine, according to data compiled by Bloomberg.

Templeton Global Bond Fund beat 99 percent of peers over the past 10 years, according to data from Chicago-based Morningstar Inc. In 2014, it is trailing 87 percent of rivals.

The European Union, along with the U.S., has imposed sanctions on Russian individuals and companies for their alleged role in stoking unrest east of Ukraine and annexing Crimea from the country in March. The EU is considering broadening the penalties and is assessing the impact this could have on the economies of its member countries, some of which rely on Russia for energy and have investment ties.

Tensions Subside

Tensions have subsided in Ukraine as Russian President Vladimir Putin said he wanted to ease the way for a May 25 presidential election by pulling back Russian troops. The yield on Ukrainian debt due April 2023, which was at about 10.6 percent at the beginning of May, dropped to 9 percent today, the lowest in more than a month.

With the crisis in Ukraine, “what encouraged us was the response of crisis management,” Hasenstab said in an April 5 video posted on Franklin Templeton’s website. “The current government has done an exceptional job of tackling not just the short-term issues but really setting the stage for Ukraine to flourish over the next five to 10 years, putting in place very difficult, but very important, structural reforms.”

--With assistance from Boris Korby in New York.