Founded in 1947, Franklin Resources Inc. (NYSE: BEN) has an enviable track record of solid fund management, growing its assets under management (AUM) to more than $800 billion in 2015. The Franklin Income Fund ("FKINX") was introduced in 1948 and has shined as the company's flagship fund ever since. At $79.6 billion in assets, it is one of the largest funds in the industry, and it remains popular with conservative investors looking for high current income.

Investment Strategy

The Franklin Income Fund invests in a diversified portfolio of bonds, convertible bonds and dividend-paying stocks with the objective of generating high current income with the potential for capital appreciation. The fund managers use a value-oriented approach to screen a broad universe of securities across multiple asset classes, focusing on those they believe are undervalued or out of favor. The fund as no allocation restrictions, so it can invest in any mix of securities based on current market conditions and outlook. The ability to invest in multiple asset classes offers the advantage of smoothing out returns over time, but it also limits the fund's ability to capture all of the returns available in either stocks or bonds.

Investment Managers

Edward Perks has been the fund's lead portfolio manager since 2002. He also manages the Franklin Balanced Fund and is the chief investment officer (CIO) for Franklin's equity group. He joined Franklin Templeton Investments' management training program in 1992 after earning a bachelor's degree from Yale University. Perks is a Chartered Financial Analyst (CFA) charter holder.

Matt Quinlan and Alex Peters joined Perks as co-managers in 2012. Quinlan, who is a portfolio manager of Franklin Advisers Inc., joined Franklin Templeton in 2005 after working at Citigroup as an analyst. He is also a CFA charter holder. Peters also manages the Franklin Real Estate Securities Fund and co-manages the Franklin Large Cap Core Growth Strategy. Peters joined Franklin Templeton in 1992. He has a bachelor's degree from the University of Washington and an MBA from the University of San Francisco.

Investment Portfolio

The fund currently allocates about 55% of its assets to equities and 40% to fixed-income securities. On the equities side, about 95% is invested in large-cap dividend-paying stocks, with Royal Dutch Shell PLC (NYSE: RDS.A), General Electric Company (NYSE: GE), Chevron Corporation (NYSE: CVX), and Pfizer Inc. (NYSE: PFE) among the top holdings.

On the fixed-income side, most of its bonds are below investment grade, which adds juice to the return but adds risk as well. A significant portion of assets is invested in convertible preferred stock, which offers high fixed-dividend yields and the option to convert to common stock. Among the portfolio’s largest preferred stock holdings are Bank of America Corporation (NYSE: BAC), Ford Motor Company (NYSE: F), Wells Fargo & Company (NYSE: WFC) and Cisco Systems Inc. (NASDAQ: CSCO).

At $25 billion, the fund's junk bond allocation is the largest of any mutual fund. A large portion of these bonds was from the energy sector, which was hit hard in 2014 and 2015, resulting in a steep loss in the fund's net asset value (NAV) and a decline in AUM.

Franklin Income Fund's Role in a Portfolio

The fund is considered a core holding for conservative investors seeking high current income. With its large allocation of below-investment-grade bonds, the fund carries slightly more investment risk than other fixed-income funds, but its allocation of high-quality, large-cap, dividend-paying stocks tends to mitigate the bond risk and has the effect of smoothing out returns over time.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.