Templeton's investment portfolio and asset allocation rebalancing

He believed that no matter how much research you conduct, you cannot predict or control the future; to reduce risk, you must diversify your investments. Diversification operates along two primary dimensions: First, asset class diversification—he specifically highlighted cash, bonds, and stocks as the three core asset classes. Second, geographic market diversification—to avoid overexposure to a single country’s market. Thus, Templeton pioneered global investing. What advantages does this bring? It dramatically expands the universe of investment choices: while the U.S. offers several thousand stocks, the global market comprises tens of thousands. Valuation levels vary significantly across countries, making it easier to identify undervalued stocks. It also mitigates country-specific risks, enhancing portfolio stability. So how was his investment portfolio structured? The allocation among major asset classes dynamically adjusted according to market valuations. As shown in this table, the equity allocation of the Templeton Fund ranged from a high of 100% down to approximately 60%, with the remainder invested in bonds or cash. The table also shows shifts in regional allocations—such as North America, Europe, and Asia-Pacific. Regarding stock selection, he never explicitly prescribed sector-based classification; however, holdings were numerically quite diversified. In 1967, the fund held fewer than 30 stocks; as assets under management grew, the number rose to over 100 by 1983, and reached 240 by 1994. For example, in 1985, the fund held 115 stocks spanning four continents and 21 industries. Its largest holding that year was a U.S. department store company, accounting for just 7% of the common stock portfolio—a relatively low concentration. In 1988, someone asked Templeton what an “ideal” investment portfolio looked like. He replied: there is no universal portfolio—allocations must be continually adjusted based on personal income, net worth, tax situation, family obligations, and other individual circumstances—though some general principles apply. His 1988 recommendations for investors with over $1 million in assets are worth noting: • Maintain a cash reserve (including bonds and other fixed-income assets) equal to roughly 25% of annual income; • Allocate more than two-thirds of the portfolio to common stocks; • Invest the remainder in real estate and life insurance. • Hold at least 10 individual stocks; • Limit exposure to any single industry to no more than 25%; • Cap exposure to any single country at no more than 80%. In summary, his portfolio was equity-centric—typically exceeding 60% in normal valuation environments—with the balance in bonds and cash. Equity weightings were flexibly adjusted based on valuation—potentially ranging from 0% to 100%. 3. How did he rebalance? Early in his career as an investment advisor—for instance, in 1953—Templeton implemented a typical “60% Plan.” When the Dow Jones Industrial Average traded within its normal valuation range, equity allocation stood at 60%, dynamically adjusted based on valuation. For example: if market valuation rose two tiers above the normal range, equity allocation dropped to 50%; if valuation fell two tiers below normal, equity allocation increased to 70%. Another example: when valuation exceeded the 20-year historical average by more than 35%, full 100% equity allocation was warranted; when valuation exceeded fair value by over 66%, equity allocation could be reduced to just 10%, and in extreme cases, fully liquidated. While serving as an investment advisor, Templeton’s team reviewed clients’ portfolios monthly and adjusted allocations accordingly to complete rebalancing. He firmly believed no stock was ever “set-and-forget”—every holding required periodic review and reassessment.

An alternative solution for low-volatility, multi-source income

Data source: Wind; statistical period: For 2023 data, calculations begin from the fund’s inception date of 2023-04-19; for 2025 data, calculations end on 2025-06-13. From the post-look-through major asset class weights, the fund began allocating to U.S. equities relatively early—and did so gradually. It also executed tactical trades in Hong Kong equities: for instance, increasing exposure to the Hong Kong market at the end of 2024, successfully capturing the early-2025 surge in DeepSeek-related stocks. Additionally, since this year, the fund has initiated modest allocations to gold. Below is the fund manager’s summary of overseas allocation strategy, as outlined in the fund’s official reports. Starting in 2023, the fund began implementing diversified overseas equity allocations. As reflected in periodic report summaries, dynamic adjustments continued—for example, reducing exposure to Southeast Asian markets in Q2 2024. Overall trend in overseas asset allocation: • 2023: Global diversification (new allocations to Vietnam, U.S., and Japanese equities); • 2024: Gradual reduction in Southeast Asian market exposure (per Q2 report); overall overseas allocation decreased in the second half; • 2025: Further reduction in overseas equity exposure. The 2024 annual report first flagged valuation risks in U.S. equities: "With the U.S. presidential transition, global trade tensions may shift, posing potential challenges to domestic exports. Overseas equity markets—particularly U.S. equities—are trading at historically elevated valuations, diminishing their risk-adjusted appeal. In contrast, domestic equity valuations compare favorably on a global basis, suggesting greater opportunity relative to risk." The fund’s portfolio manager is Wu Xian—a name perhaps less familiar to many investors. A quick search reveals his prior experience: he worked as a researcher at State Street Global Advisors (U.S.), then as an investment advisor at ConvergEx Financial. This background likely deepened his expertise in overseas assets. Later, he served as Senior Manager at China Life Insurance Pension Co., Ltd., gaining substantial experience in China’s insurance asset management space—and thus strong familiarity with domestic financial markets. Additionally, Guohai Franklin Templeton Fund Management Co., Ltd.—the fund’s management company—may also be relatively unfamiliar to many. The firm exhibits a “small but excellent” profile: though its product lineup is compact, its long-term performance has been consistently solid. Indeed, multiple products from this company appeared in my earlier tracking of Fund No. 885001. Moreover, it is a Sino-foreign joint venture—the foreign shareholder, Franklin Templeton, brings over 70 years of global investment experience and is a renowned asset management firm. This partnership likely enables the fund to fully leverage its shareholder’s extensive overseas research and investment resources. Below is Grok’s summary of Franklin Templeton: Franklin Templeton ranks among the top-tier U.S. asset management firms. With $1.58 trillion in assets under management (AUM), a global operational footprint, deep fixed-income expertise, and a strategic acquisition history, it enjoys significant competitive advantages. Through innovation and integration, it maintains robust market positioning—well suited to serve diverse investor needs. Key strengths include: • Scale and diversification: Manages $1.58 trillion across equities, fixed income, alternative investments, and multi-asset strategies—offering broad investment choice. • Global reach: Operates in multiple countries, serving both retail and institutional clients—and attracting international investors.

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