Star fund manager closes short Treasurys bet after losing billions in assets

Scott Olson/Getty Images(Photo by Scott Olson/Getty Images)
  • Franklin Templeton fund manager Michael Hasenstab has been betting on rising Treasury yields since 2017. In that same time period, Treasury yields have fallen to their lowest levels ever.
  • After being on the wrong side of the trade for years, Hasenstab has finally thrown in the towel and exited the trade,Bloomberg reported.
  • The flagship fixed-income fund that Hasenstab manages has seen its assets under management nearly cut in half, falling from $US40 billion in 2017 to $US22 billion today, according to Bloomberg.
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Fund manager Michael Hasenstab, who manages Franklin Templeton’s flagship fixed-income mutual fund, has finally thrown in the towel on his money-losing short bet against Treasurys, Bloomberg reported.

Hasenstab was betting that Treasury yields would rise, and initiated the short position back in 2017. Since then, Treasury yields have fallen to historic lows as the Fed launched a number of monetary stimulus policies to combat the economic damage inflicted by the coronavirus pandemic.

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A look at the Templeton Global Bond Fund fact sheet shows average duration, which measures the sensitivity of a fixed-income portfolio’s price to changes in interest rates, turned positive to 2.06 years as of March 31. This is a dramatic change from the average duration reported as of December 31, 2019, of negative 1.01 years.

Additionally, Bloomberg reported that the fund has tactically unwound its short position, citing a person familiar with the situation.

Assets under management in the mutual fund that is often utilised by financial advisers fell $US4.4 billion over the past three months to $US22.55 billion today. Since the start of Hasenstab’s short Treasurys bet in 2017, assets in the fund have fallen by $US18 billion. The fund had nearly $US70 billion in assets in 2015.

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Performance for the adviser share class of the fund has suffered over the past five years, returning just 0.49% relative to its benchmark return of 2.96% as of March 31. Meanwhile, 10-year performance for the fund has outperformed its benchmark by 40 basis points.

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