HEAD-TO-HEAD: First State vs Principal

123456

Source: FE. The three-year performance of the First State fund versus the Principal fund.

All fund NAVs and sector performance have been converted to US dollars.

Over the three-year period, the Principal fund consistently outperformed the First State fund during the first two years. However, the performance gap closed after February 2016 and the First State fund returned more during the full three-year period.

Share attributes First State’s underperformance during 2014-2016 to oil stock exposure. Given that the manager focuses too much on the quality of the companies’ management, he underestimated the risk that came with oil price volatility.

However, she said that on a ten-year horizon, the First State product outperforms the Principal fund by a huge margin. According to FE data, the 10-year performance of the First State fund is 109.03%, compared to Principal’s 70.35%.

Share acknowledged, however, that given First State’s quality focus and longer holding periods, the fund may underperform the Principal fund in a bull market.

“The First State fund usually doesn’t capture much [return] when the market is in a rally because they are mostly invested in the most conservative companies,” Share said.

Both funds are less volatile than the sector average of 18.52 over the three-year period, FE data shows. But First State’s product, with a quality focus, is less volatile (16.83) than Principal’s fund (17.99).

123456