Fund performance
According to Share, the JP Morgan fund tends to do well in rising markets, such as 2012, when the fund posted a gain of 32.8%. She added that the Templeton fund also does well in rising markets (gaining 36.4% in 2012), but also tends to deliver during a downturn.
For example in 2011, the Templeton fund fell by 15.6% but still managed to outperform the index and the JP Morgan fund, which slumped by 29.8% that year. “[Templeton] probably have a bigger focus on quality, which tends to hold up better when there is a market downturn,” said Share.
During 2015 and 2016, the JP Morgan fund gained 2.1% and lost 5.9% respectively, while the Templeton fund posted losses of 5.5% and 7.1% respectively.
Three-year performance
Source: FE. Trailing three years to 17 February 2016.
Manager review
Joanna Kwok has been the lead manager of the JP Morgan fund since 2013. Kwok joined JP Morgan as a fixed income analyst in 2002 and moved across to her current team in 2005. She was appointed secondary manager for the fund alongside Hetal Shah in 2009 and assumed a lead role in April 2013 following Shah’s departure.
While she has been involved with the fund for some time, Share said that Kwok has been the key decision maker only since 2013.
“Since she took the helm, we have seen very encouraging improvements in the track record. We would like to see how she delivers over a full market cycle,” said Share.
Templeton’s head of emerging markets group Mark Mobius is the named manager of the fund but Chetan Sehgal and Vikas Chiranewal are responsible for the daily management. Sehgal and Chiranewal joined Templeton in 1995 and 2006 respectively and have led the fund’s strategy since it launched in 2008.
According to Share, the duo are experienced hands with a long tenure running the fund on a day-to-day basis.
“Even though the named manager is Mark Mobius, he’s not actually that involved on a day-to-day basis, he’s more kind of a like supervisor, overseeing the overall investment process and team,” said Share.
Fee review
The JP Morgan fund had an ongoing charge of 1.70%, based on expenses for the year ended September 2014. This is significantly below other funds in the Morningstar category, which had a median cost of 2% and also lower than similar small cap funds that had an average cost of 1.95%.
In contrast, the Templeton fund A USD share class has an ongoing charge of 2.23%, which is 26 basis points more expensive than the Asia ex-Japan small/mid cap equity Morningstar category median.
“JP Morgan definitely compares very favourably to the average peer whereas Templeton is actually quite expensive and [fees are] something that we think that Templeton can improve on,” said Share.
Conclusion
Morningstar has a neutral analyst rating for the JP Morgan fund and a bronze analyst rating for the Templeton fund. A bronze rating indicates that over a full market cycle, the fund is expected to outperform its peers whereas a neutral rating reflects an expectation that it will not outperform.
In a hypothetical investment choice between the two, Share prefers the Templeton fund despite the higher ongoing charges because the managers have a longer track record.
“We prefer the Templeton offering because we have a higher conviction in the management team and their processes, which have a proven good track record,” said Share.
“With the JP Morgan fund we definitely see potential there as well, but Joanna is still building her track record there, and we need more time to gain comfort,” Share added.
