HEAD-TO-HEAD: Nordea vs Templeton

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The three-year cumulative return of the Templeton fund reached 16.25%, beating Nordea (5.13%) as well as the benchmark (1.57%), according to FE.

The emerging markets funds in Singapore on average dropped 7.71% during the same period. The number of small-cap focused funds is too small to provide a meaningful comparison, Ng added.

Templeton’s outperformance in mainly attributed to its heavy overweight in the India market, which has been generating good returns since Narendra Modi was elected the country’s Prime Minister in May 2014, Ng explained.

Still, since the fund was launched in October 2007, it has shown “a lower volatility with better downside protection [than the Nordea fund], and at the same time did not lag far behind during a bull market,” he added.

For a rolling five-year period, the fund also ranked in the first quartile among 135 funds in FE’s emerging markets fund category in Singapore by returning 57.24%.

The Nordea product, by comparison, was incepted in 2013, and the performance in the past three years is more close to the benchmark.

“Given its bias on growth, it should have a better upside when the markets are more sentiment or growth-style driven, although it will come with higher volatility,” Ng said.

Volatility of the funds in terms of three-year annualised standard deviation is 14.43 for the Nordea fund, 12.17 for Templeton’s, and 14.71 for the MSCI benchmark.

Both funds have seen notable inflows during this year, but Ng added the Templeton fund has recently held a cash level above 10% and the latest figure is 7.2%.

“The unusually high level of cash holdings might due to the capital inflows in which the fund manager needs to wait to build new positions and cannot deploy the cash at once.

“It’s a prudent approach, but it might act as a return detractor given the bull run at the moment,” Ng noted.

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