Posted inHead To Head

Eastspring Asian Balanced vs First State Bridge

This week’s Head-to-Head puts balanced fund strategies from Eastspring Investments and First State Investments against each other.

Both the Singapore-domiciled funds were launched in 2003 and are structured as feeder funds, but their investment strategies differ.

The Eastspring Asian Balanced Fund feeds into three funds: the Eastspring Asian Equity Fund, the Eastspring US High Investment Grade Bond Fund and the Eastspring US Investment Grade Bond Fund.

The First State Bridge Fund invests in the First State Asian Equity Plus Fund and the First State Asian Quality Bond Fund. 

Apart from the First State fund’s higher allocation to dividend yielding companies, another major differentiating factor between the two funds lies in their fixed income allocation.  The Eastspring fund is invested in US fixed income securities while the First State fund allocates to Asian issuances. 

Eastspring Asian Balance Fund had SG$983.1m ($736.7m) in assets under management on 30 November while the First State Bridge Fund had assets worth SG$1206.7m  ($904.2m).

India and China were the two top performing stock markets in 2014 and these countries have a significant allocation in the underlying schemes of both the balanced funds. 

But, going forward many analysts expect market volatility to rise in the Mainland, while in India a lot depends on the actual implementation of reforms. Furthermore, the US is poised to raise interest rates this year and it is uncertain what impact that will have on these two markets. 

In such a scenario, which of these two balanced funds will be able to deliver better performance?

Seow Shin Horng, head of investments at Bank of China, provides a comparative analysis. 

Investment strategy review

“The First State Bridge Fund is a pure Asian play,” noted Seow. The portfolio includes high dividend Asia ex-Japan equities and investment grade Asian bonds.

The Eastspring Asian Balanced Fund by comparison invests in a portfolio comprised of Asia ex-Japan equities and investment grade corporate bonds and other fixed income securities issued in US. 

The Eastspring fund allocates a higher proportion of its fund to Asian equities (56% weighting) compared to the First State fund, which has a 51% weighting toward Asian equities.

Worthwhile to note is that the Asian equities in the First State fund are concentrated, with about 63 high dividend-paying companies.

With respect to the fixed income allocation, the First State fund has invested about 48.1% in Asian fixed income securities. 

In contrast, the Eastspring fund invested nearly 27% of its assets in its underlying US high investment grade bond fund and 12.1% in US investment grade bond.

About 60% of the Eastspring fund’s fixed income allocation is in A-rated and above debt securities. This compares to 31% of similar rated papers held by the First State fund.

The top three holdings of the Eastspring fund are Samsung Electronics, Taiwan Semiconductor Manufacturing and China Holding. The largest holdings of the First State Fund are in Cheung Holdings, Taiwan Semiconductor and OCBC.

Performance review


Both funds have a customised benchmark index for measuring their performance.

In regards to the First State Fund, both the MSCI AC Asia Pacific ex-Japan and the JP Morgan Asia Credit Indices have an equal weighting in the performance benchmark. 

According to Seow, the performance of the First State fund has received a boost due to its allocation to high dividend Asian equities. 

“This strategy plays well as the [First State fund’s equity] portfolio has been able to consistently outperform the MSCI AC Asian Pacific ex-Japan Index. 

“The performance of the Asian equities within the Eastspring fund by comparison underperforms the same index,” he explained.

The Eastspring fund tracks its performance against a customised index, comprised of the MSCI AC Asia ex-Japan Index (with a 50% weighting), the BofA Merrill Lynch US Corporates A-AAA Rated Index  (30% weighting) and the BofA Merrill Lynch US Corporates BBB-A Rated Index  (20%).

The Eastspring Fund gave nearly a 13% return for the one-year period to 21 January, whereas the First State fund registered a 15.7% return.

Even over the three-, five, and ten-year periods, the returns of Eastspring fund are lower than the First State fund.

The Eastspring fund posted 6.1%, 3.4% and 4.4% return over the three-, five- and ten-year horizons whereas the First State Fund recorded 9.4%, 7% and 6.8% return, respectively during the same periods. 

“Even if you consider the volatility of the two funds, the First State fund fares better than the Eastspring fund. The sharpe ratio of the First State fund is 2.86 while the same for the Eastspring fund is 2.06.” 

The Eastspring fund has a three-stars rating whereas the First State fund enjoys a five-stars rating from Morningstar, Seow added.

Manager review

Because they are feeder funds, both the balanced funds do not have designated managers. But their underlying funds, into which these funds invest in, have their respective managers.


Hugh Maxwell has been managing the Eastspring Asian Equity Fund since October 2013. Mark Redfearn is managing the Eastspring US High Investment Grade Bond since December 2004. Redfearn has also been managing the Eastspring US Investment Grade Bond Fund since its launch in March 2005.


Looking at the First State fund, Martin Lau has been managing the underlying First State Asian Equity Plus Fund since its launch in July 2003. Richard Jones joined Lau as a co-manager for the fund in January 2012.

Lau is director of Greater China equities at First State Stewart, which is a part of First State Investments. Lau joined the First State Stewart team in April 2002. Jones is a senior analyst/portfolio manager and joined First State Stewart in January 2010.


The manager for the First State Asian Quality Bond Fund is Nigel Foo, who has been managing the fund since its launch in June 2000. Foo is a senior portfolio manager on the Asian fixed interest team and is responsible for formulating investment strategies for the Asian bond markets, which include both dollar and local currency-denominated debt. Foo joined First State in September 2010.



Both the funds have a 4% initial charge.

However, the annual management fees of 1.3% charged by the Eastspring fund is slightly higher than the First State fund’s 1.25%.

The total expense ratio for the Eastspring fund was 1.48% for the year ended 30 June. The TER for the First State Fund was 1.42%.



“Just by considering the two funds as a stand alone option, I would choose the First State fund for its consistent performance and being a ‘pure’ Asian fund,” Seow said.

However, the Eastspring fund could outperform the First State fund, depending on investor response to the expected US interest rate hike.

In most cases, a rise in the US rate and bond yield would be expected to negatively impact the valuation of US fixed income.

However, the US rate rise expected in the second half has already been priced into US fixed income, he said, adding that capital inflow into the US will benefit US fixed income as well.

“With the likely rise in US rates and the appreciation in the US dollar, capital might flow out of Asia to the US. This might benefit the US bond portfolio of the Eastspring fund.

Ceteris paribus, the Eastspring fund will outperform the First State fund in this scenario,” he added.


Part of the Mark Allen Group.