Irish turnaround is 'probably one of the investments of the decade'
This co-mingling of the macro and the local, politics and economics, is one of the unique offerings of Franklin Templeton’s bond portfolio, according to Hasenstab, and one that can perhaps be traced to his own undergraduate degree in international relations and political economy. (Hasenstab later completed a PhD in economics, specialising in China.)
He cites a former professor, Roy Grow, a specialist in international relations as a key mentor, who “conceptually helped to look at the world through that political-economic lens”.
Hasenstab himself spends about a third of his time on the road. He and his team have visited Ireland “several” times, and have met “all the main characters”, he says. While he remains tight-lipped on individuals, he is believed to have met Department of Finance head John Moran and NTMA chief executive John Corrigan.
Overall, Hasenstab is optimistic about the prospects for Ireland and Europe. “Ireland is about three to four years ahead of other countries in Europe,” he says, though he believes that the European response to the crisis has improved.
“The crisis management has improved dramatically . . . Now the challenge will be getting the long-term sustainability back on track, so we need ongoing commitment to appropriate fiscal measures, ongoing steps towards labour market flexibility.”
In a nutshell, he believes long-term economic recovery and sustainability can be put down to that good old reliable – the debt/GDP ratio.
“Take the debt to GDP ratio. The thing Ireland has going for it is that it’s lowering the debt and increasing the GDP. For many other countries, they’re trying to lower the debt, but they don’t have any GDP growth . . .
“I don’t think that Europe, in a broad sense, will have the pro-growth competitiveness of Ireland, but if they got half of it, or even a quarter of it, that’s probably enough.”
CV Michael Hasenstab
Name: Michael Hasenstab
Job: Senior vice president of Franklin Templeton fixed income group and co-director of international bond department
Family: Married, one child
Lives: San Francisco
Education: BA in International Relations and Political Economy at Carleton College, a small private liberal arts college in Northfield, Minnesota; Masters and PhD from Australian National University, where his PhD thesis focused on the development of China’s debt and equity markets .
Career: Joined Franklin Templeton in 1995. After taking a leave of absence to complete his PhD, he rejoined the company in 2001. Has managed its flagship fixed income funds, such as the Templeton Global Bond Fund for just over 10 years .
Hobbies: Mountain-climbing. Despite several visits to Ireland, he doesnt play golf.
Something you might expect: Hes being compared to other heavyweight bond investors such as Bill Gross of Pimco.
Something that might surprise:In a departure from the investment banker alpha-male stereotype, in person he is a quietly confident, well-spoken all-round nice guy.
View from abroad: Hasenstab on . . .
Ireland:“Ireland is now the second fastest if not the fastest growing economy in Europe, along with Germany. The PMI numbers in Ireland are in fact better than in Germany.”
Ireland as a destination for FDI: “Ireland maintains very business-friendly income taxes and corporate taxes, so it remains a destination for foreign companies who want to operate in Europe. This is not an accident. Its because of the business, regulatory and tax environment.”.
His 10 per cent holding of Irish bonds:“It’s an important investment [but] relative to the total assets I manage, it’s moderate.”
The liquidity of the Irish secondary bond market:“Right now there are more buyers than there are sellers . . . Some of the buyers that sold off in the middle of last year are coming back in.”
Europe:“Europe needs co-ordination beyond crisis management. It now needs to focus on more long-term sustainability, which includes a more unified banking union and fiscal arrangement. Those don’t need to happen tomorrow but what we do need to happen tomorrow is that we see signs that we are going in that direction. We need to see progress. We will be watching closely over the next couple of years.”
Monetary policy:“The policy of printing money is unprecedented. Never in the history of central banks have we printed this amount of money. The only example we have is Japan in the 1990s. [The policy is] artifically suppressing yields in the US and Germany, boosting asset prices elsewhere. Ultimately, it will probably transmit inflation into emerging economies.”
European bond-buying:“The ECB is an important stop-gap in the future if a country needs liquidity assitance, provided they are doing the right things fundamentally.”
Rating agencies:“Should Ireland be upgraded? Absolutely. Ireland is regaining access to the credit markets, meeting all of their targets, surprising a little on the upside on some of its targets. As soon as it’s upgraded to investment status, buyers will come back in.”
*This article was edited at 12.02pm on December 14th, 2012