Digital Asset Risk Information

All investments involve risks, including possible loss of principal.

Digital Assets and Cryptocurrency investing is highly speculative.  These markets have extreme price fluctuations, regulatory uncertainty security and liquidity risks, among others.  Investors should speak to a financial advisor before making investment decision.

See below topics for more information.
 

The App is provided as a service, and for informational purposes only, by Franklin Distributors, LLC. (“Franklin Distributors”) and/or its affiliates that are the Franklin Templeton corporate group of companies (collectively, “Franklin Templeton,” “FT,” “we,” or “us”). Franklin Distributors is a subsidiary of Franklin Resources, Inc. (“FRI”) and serves as the principal underwriter to many of the registered investment companies commonly known as the Franklin Templeton funds, including certain funds available through the App (each, a “Fund,” and collectively, the “Funds”).
 

Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology, (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.
 

Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations. Speculative trading in Bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.

Stablecoins represent a new and rapidly evolving technological development which may be subject to regulatory uncertainty, competitive pressures, security risk, and limited performance history. There may be risks associated with the issuance, redemption, transfer, custody, and record keeping of tokens maintained and recorded primarily on a blockchain. A stablecoin is a type of token that has its value pegged to another currency, commodity, financial instrument, or basket, and should, if well designed and operated, maintain a steady value, neither appreciating nor depreciating in price. Stablecoins typically tie their value to the US dollar in some way. The collateral pools associated with these stablecoins are primarily, though not exclusively, comprised of government-issued fiat currencies or fiat-denominated fixed income securities.
 

Certain Accounts will invest in cryptocurrencies, such as, but not limited to, Bitcoin or Ethereum, as well as other digital representations of value or rights (including for investment, finance or idle cash purposes). Such assets or investments may be transferred and stored electronically, using distributed ledger technology or other technology, and may include but are not limited to any decentralized application tokens and blockchain-based tokens and other digital assets, or instruments for the purchase of such, including but not limited to token rights agreements, token warrants and other instruments (together with cryptocurrencies, “Digital Assets”). Investments in Digital Assets are subject to many specialized risks and considerations as described in notes i-vii above.
 

Statements made from this account include opinions.  Discussions may be theoretical in nature and concepts discussed may not come to pass.  Blockchain technology represents a new and rapidly evolving industry which is subject to regulatory uncertainty, competitive pressures, security risk, limited performance history and volatility.  Discussions should not be regarded as any type of trading recommendation, or as a signal about any past, current or future trading activity in any fund or strategy, by Franklin Templeton and its affiliates.
 

Asset allocation risk: The portfolio manager’s ability to achieve the investment goal(s) may depend upon their skill in determining a portfolio’s asset allocation mix and/or selecting sub-advisers. There is the possibility that their evaluations and assumptions regarding asset classes and the selected sub-advisers will not be successful in view of actual market trends.

Concentration risk: Concentrating investments in a particular country, region, market, industry, or asset class means that performance will be more susceptible to loss due to adverse occurrences affecting that country, region, market, industry or asset class. A portfolio concentrating in a single state or jurisdiction is subject to greater risk of adverse economic, market, political or social conditions and regulatory changes than a portfolio with broader geographical diversification.

Cybersecurity risk: Portfolio manager(s), service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio manager(s) and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.

Liquidity risk: Liquidity risk exists when the markets for particular securities or types of securities are or become relatively illiquid so that it is or becomes more difficult to sell the security, partially or in full, at the price at which the security was valued. Illiquidity may result from political, economic, or issuer-specific events; changes in a specific market’s size or structure, including the number of participants; or overall market disruptions. Securities with reduced liquidity or that become illiquid involve greater risk than securities with more liquid markets.

Market risk: The market value of securities or other investments will go up and down, sometimes rapidly or unpredictably. Investments may decline in value due to factors that affect an individual issuer (such as the result of supply and demand) or a particular industry or sector. A security’s or other investment’s market value may also go up and down due to general market activity or other results of supply and demand unrelated to the issuer, such as real or perceived adverse economic conditions, changes in interest rates or exchange rates, or adverse investor sentiment generally.

Non-diversification risk: Non-diversification of investments means a portfolio may invest a large percentage of its assets in securities issued by or representing a small number of issuers. As a result, the portfolio’s performance may depend on the performance of a smaller number of issuers, and it may be more sensitive to a single economic, business, political, regulatory, or other occurrence than a more diversified portfolio might be.

New strategy risk: Some strategies discussed are newly organized, with a limited history of operations.

Volatility risk: Trading prices for Digital Assets have historically been highly volatile. The value of the Digital Assets held by an account could decline rapidly, including to zero. Digital Assets have not been in existence long enough to assess the volatility of market cycles with any precision and an investment in an account may turn out to be substantially worthless. Investors should be prepared for volatile market swings and prolonged bear markets.

Unlisted securities risk: Unlisted securities (i.e., securities not listed on a stock exchange or other markets and for which no liquid secondary trading market exists) may involve a high degree of business and financial risk and may result in substantial losses. The companies underlying such securities may have relatively limited operating and profit histories. Many of these companies may also need substantial additional capital to support expansion or to achieve or maintain a competitive position and there is no assurance that capital will be available to finance such needs. In the absence of a liquid trading market for unlisted securities, they will be difficult to value. It is also possible that such investments will be difficult to liquidate when desired, which may limit the ability to realize their full value. Although it is generally desirable that unlisted securities become listed in due course, there can be no assurance that this will be the case, or that sufficient liquidity for substantial shareholdings will be available following listing.

Valuation: The strategy may directly or indirectly invest in securities for which reliable market quotations are not available. The process of valuing such securities is based on inherent uncertainties, and the resulting values may differ from values that would have been determined had readily available market quotations been available. As a result, the values placed on such securities by the Advisers may differ from values placed on such securities by other investors or a client’s custodian and from prices at which such securities may ultimately be sold.
 

Certain investments should be viewed as illiquid and may require a long-term commitment with no certainty of return. The value of and return on such investments will vary due to, among other things, changes in market rates of interest, general economic conditions, economic conditions in particular industries, the condition of financial markets and the financial condition of the issuers of the investments. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor's ability to dispose of them at a favorable time or price.

Important Information

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Products, services and information may not be available in all jurisdictions and are offered by FT affiliates and/or their distributors as local legislation permits. Certain statements contained herein are intended to provide insight on macroeconomic issues, and this commentary is not intended as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. Please consult a financial professional for information on the availability of products and services in your jurisdiction.

Separately Managed Accounts (SMAs) are investment services provided by Franklin Templeton Private Portfolio Group, LLC (FTPPG), a federally registered investment advisor. Client portfolios are managed based on investment instructions or advice provided by affiliated subadvisors of Franklin Templeton. Management is implemented by FTPPG, the designated subadvisor or, in the case of certain programs, the program sponsor or its designee. On December 1, 2022, Legg Mason Private Portfolio Group, LLC (LMPPG) changed its name to Franklin Templeton Private Portfolio Group, LLC (FTPPG).

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