All investments involve risks, including possible loss of principal. An investment in any Portfolio utilizing the Strategy involves a high degree of risk and is suitable only for investors who can afford to risk the loss of all or substantially all such investment. The Strategy is expected to hold illiquid investments. The Strategy’s performance may be volatile. The Strategy’s fees and expenses may offset its trading profits.
The types of investments that the Strategy anticipates making involve a high degree of risk. While targeted returns should reflect the perceived level of risk in any investment situation, there can be no assurance that any Portfolio utilizing the Strategy will be adequately compensated for risks taken. A loss of an investor’s entire investment is possible. The timing of profit realization, if any, is highly uncertain. Losses are likely to occur early in the term of any Portfolio employing the strategy, while successes often require a long maturation.
Marketplace loans are subject to the risks associated with debt investments generally, including but not limited to, interest rate, credit, liquidity, high yield debt, market, and income risks. Marketplace loans generally are not rated by rating agencies; are often unsecured; not guaranteed or insured by a third party; not backed by any governmental authority; and are highly risky and speculative investments similar to an investment in lower rated securities or high yield debt securities (also known as junk bonds) because their payment depends entirely on receipt of payments from individual borrowers (or their guarantor).
Illiquid securities may trade at a discount from comparable, more liquid investments, and may be subject to wide fluctuations in market value. Also, it may not be possible to dispose of illiquid securities at a favorable time or price.
Investments in marketplace loans are dependent on the continued success of the platforms that originate such loans. The Strategy materially depends on such platforms for loan data and the origination, sourcing, and servicing of marketplace loans and on the platforms’ ability to collect, verify and provide information about each marketplace loan and borrower.
The Strategy may include investing some assets in smaller companies. These companies may be subject to greater levels of credit, market and issuer risk than companies with larger market capitalizations. Also, securities of smaller companies may trade less frequently and in lesser volume than more widely held securities and their values may fluctuate more sharply than other securities.
The Strategy intends to use leverage, which creates the opportunity for increased net income but also creates special risks for investors. The Strategy intends to use leverage through the borrowing of funds under a committed financing arrangement and the purchase of mortgage dollar rolls. However, other forms of leverage may also be used, including through the issuance of senior securities such as preferred shares, through the lending of portfolio securities, and the use of swaps, other derivatives, reverse repurchase agreements, and when-issued, delayed delivery or forward commitment transactions. To mitigate leverage risk from such transactions, the Strategy may segregate liquid assets against or otherwise cover future obligations under such transactions.
Please refer to the applicable Portfolio’s Offering Documents for a more detailed description of the risks of investing in the Strategy through such Portfolio.
Interests in any Portfolio utilizing the Strategy may not be appropriate for all investors and involve important legal and tax consequences and investment risks that should be discussed with your professional financial, legal and tax advisors prior to investing.
This information is not a complete description or analysis of every risk or material fact.
There is no assurance that the employment of this strategy will result in the investment objective being achieved. Various account minimums or other eligibility qualifications apply depending on the investment strategy or vehicle.
The information contained on this webpage is intended only as a general overview of Franklin Templeton investment capabilities and is for informational purposes only and should not be construed or relied upon as investment advice.
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.
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