The funds are skewed towards UK and Europe with holdings amounting to roughly twice the weight the regions command in the benchmark MSCI AC World index.

“Investors remain sceptical, remain on the side-lines, and we think this is an opportunity on a stock-by-stock basis to find companies that get thrown out with the bathwater,” Dylan Ball, a portfolio manager at the Templeton Global Equity Group, told Reuters.

Franklin Templeton's call on the UK makes it something of a contrarian particularly ahead of next week's Brexit vote.

Brexit was the top tail risk for global fund managers leading to the UK being the most underweighted market globally, according to the latest Bank of America Merrill Lynch survey.

Europe and the UK are the world's worst performing stock markets this year, each down nearly 10 percent in US dollar terms.

In another non-consensus call, Templeton's Ball said the fund had bought into European banks such as France's BNP Paribas (>> BNP PARIBAS), Switzerland's Credit Suisse (>> Credit Suisse Group AG) and Italy's UniCredit (>> UniCredit SpA) in the Templeton Growth Fund (OIEC) and Templeton Global SICAV.

European financials <.SX7P> are the worst-performing sector in Europe year-to-date, down by over 27 percent since the start of the year.

“If we do get a little sniff of higher yields or a wee bit of inflation or even a return to growth or even the Fed trying to get through to a second rate hike, we think the valuations (of banks) could start to reflect an improving fundamental scenario,” Franklin Templeton's Ball said.

(Reporting by Kit Rees, Editing by Vikram Subhedar)

By Kit Rees