Overview of Franklin Templeton's Ed Perks on Fixed Income Investing
This Bloomberg Masters in Business interview (host Barry Ritholtz) features Ed Perks — long-tenured Franklin Templeton executive (joined 1992), CIO of Franklin Income Investors, president of Franklin Advisors, and lead PM of the flagship Franklin Income Fund. The conversation covers Perks’s career, how his multi-asset, income-first investment philosophy developed, and tactical/strategic views across fixed income, convertibles, structured equity, equities and private credit in the post‑2022 market environment.
Key takeaways
- Background: Perks joined Franklin out of college in 1992, rotated through equity, convertibles and credit roles, became a PM in 2002 and lead PM of Franklin Income Fund in 2004.
- Core philosophy: income-first, long-term horizon, buy assets at reasonable valuations and “get paid to wait.” Emphasis on security selection and idiosyncratic risk, plus flexibility to allocate across the capital structure.
- Multi-asset flexibility: the strategy frequently owns multiple parts of the same company’s capital structure (equity, convertibles, bonds) when fundamentals are attractive.
- Fixed income backdrop: post‑2022 higher yields restored income as a meaningful component of returns. Perks sees attractive income across Treasuries, agency MBS, investment-grade corporates and selective high yield, though corporate spreads remain a watchpoint.
- Where he looks for opportunity: higher-quality portions of high yield (upper BB / B area), agency mortgage-backed securities (where spreads widened), structured equity and convertibles to capture upside with income, and select dividend-paying equities (utilities, industrials, healthcare, energy, materials).
- TIPS: not a focus today; could be used if inflation trends change materially.
- Private credit: growing asset class with meaningful capital inflows — useful but watch transparency, valuation and potential loss of discipline as capital floods in.
- Macro / daily focus: three main risk compasses — equity risk, credit risk and interest-rate/macro risk. Policy (fiscal, monetary, regulatory) and geopolitical news matter; Perks watches the curve (long end) for systemic market sensitivity.
- Volatility and positioning: Perks is cautious when implied volatility (e.g., VIX) is very low while policy uncertainty is elevated. Flexibility and liquidity in the portfolio allow playing offense during dislocations.
- Franklin Income Fund: long heritage (operating since mid-20th century with uninterrupted monthly dividends), a “go-anywhere” income mandate and adoption across multiple vehicles (mutual fund, SMA, ETF).
Topics discussed
- Career path and the value of cross-asset experience (equities, convertibles, credit)
- Convertibles and structured equity as a way to blend income and upside asymmetry
- Fixed income market structure post‑2008 and post‑2022: the return of bond income
- Where to allocate across Treasuries, agency MBS, investment grade, high yield
- The importance of security selection and buying quality within lower-rated buckets
- Private credit: opportunities and transparency/valuation concerns
- How to filter market noise (news, tweets, policy announcements) and distinguish signal versus short-term moves
- US vs non-US equities and the role of dollar moves and policy in recent flows
- Investor behavior: the risks of going to cash in crises, and the benefits of active, flexible mandates
- Practical advice to young investors: don’t over‑specialize early; get experience and raise your hand for opportunities
Notable quotes / insights
- “I like buying things that trade at reasonable valuations that might not have an immediate catalyst…you can get paid to wait.”
- On convertibles: they allow “positive asymmetry — you do better on the upside than you’ll be hurt on the downside.”
- On market noise: “If you can step back…get the insights from dedicated analysts…that’s where some opportunities come in.”
- On portfolio construction: “Between a third or 40% of the portfolio will be invested in companies where we own multiple parts of a company's capital structure.”
Actionable recommendations for investors
- Diversify across asset classes and within the capital structure — owning different parts of a company can capture value and income.
- Prioritize security selection and idiosyncratic research, especially in lower‑quality credit buckets where dispersion is high.
- Use convertibles and structured equity to access upside participation with higher blended yields than plain equity where appropriate.
- Watch policy and the long end of the curve — long rates and policy uncertainty drive systemic risk more than headline noise.
- Be cautious when implied volatility is very low while macro/policy uncertainty is high — that mismatch can precede surprises.
- Treat private credit carefully: it has a role, but monitor valuation transparency and capital inflows that can dampen discipline.
- For new grads: start broad, sample roles across the industry, don’t over‑specialize immediately, and volunteer for responsibilities.
Where Perks sees relative value today (summary)
- Fixed income: agency MBS (after spread widening), investment-grade corporates selectively, higher-quality high yield (upper B / BB), and yield-rich Treasuries depending on duration view.
- Equity-related income: structured equity and convertibles to improve blended yields while retaining equity upside (including selective exposure to large tech via convertibles/structure).
- Geographic: some reallocation to non‑U.S. equities has merit after recent outperformance; currency and policy moves (dollar fall) matter.
- Watch list: private credit developments and transparency; mortgage market activity contingent on lower mortgage rates and labor market health.
About the guest
- Ed Perks — with Franklin Templeton since 1992; roles include CIO of Franklin Income Investors, president of Franklin Advisors, member of Franklin’s executive committee, and lead portfolio manager of the Franklin Income Fund (lead since mid‑2000s). Known for a multi-asset income-oriented, flexible investment approach.
Further context / fund note
- Franklin Income Fund: long-lived strategy (decades old, celebrated ~75 years), known for uninterrupted monthly dividends and a flexible, multi-asset income mandate capable of investing across fixed income, convertibles, equities and asset-backed opportunities.
References from interview: career timeline (joined 1992; PM team 2002; lead PM 2004), focus on convertibles and structured equity as core tools, and macro emphasis on policy and long-end sensitivity.