Franklin K2 Alternative Strategies

The fund is multi-manager hedge fund portfolio investing in four core sub-strategies: long short equity, event driven, credit/relative value and global macro. These are complemented by a small allocation to a discretionary Equity Risk Overlay, which is a tool to control portfolio equity beta within the predefined ranges. The strategy currently manages about $3 billion, of which $1.8 billion is UCITS. March 2020 was a challenging month for the fund, with negative attribution largely driven by the equity allocation. Particularly those managers with a cyclical bias struggled the most. The Event Driven allocation held up relatively well while the Relative Value bucket disappointed, with underlying managers underperforming amid the indiscriminate sell-off (cross-correlation moving towards one) across asset classes. On a forward looking basis, the current level of pricing dislocations between companies, industries and asset classes, offers abundant opportunities for select hedge strategies, particularly across RV offerings.