HEAD-TO-HEAD: Aberdeen Standard versus JP Morgan

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The ASI and JP Morgan funds versus their benchmark indices and sector in Hong Kong. Source: FE Analytics. In US dollars.

Performance

Ng believes that the style differences of the two funds means that their relative performance depends on whether value or growth stocks are in favour.

The ASI fund, for example, faired well in 2016 when deep value stocks outperformed the broader market during the second half of the year, he said.

Annual discreet calendar performance (%)

Source: FE Analytics

The opposite is true for the JP Morgan fund when value stocks outperform.

“While the JP Morgan fund performed well in the first half of 2016, there was a sharp reversal during the second half where deep value stocks were up, such as the banks. That is why the JP Morgan fund underperformed during that period,” he said.

But when growth stocks are in favour, the JP Morgan fund is expected to do well.

“Growth stocks were in favour during 2017, which is why the JP Morgan outperformed,” Ng said.

He noted that the JP Morgan fund’s huge outperformance of 43.06% in 2017 is also due to “gearing”.

“Previously, the JP Morgan fund was allowed to use gearing up to 25% by using derivatives, which means that the net exposure of the fund could be up to 125%. The manager had the discretion to decide whether to increase or drop the gearing based on his conviction of the market,” he explained.

However, the gearing strategy of the fund was dropped in 2018 due to regulatory reasons, he said, without elaborating.

In terms of volatility, Ng expects that the ASI fund is less volatile than the JP Morgan product.

“Historically, the JP Morgan fund’s focus on high growth companies with high multiples has made it more volatile. Volatility is also higher because the fund it used to utilise the gearing strategy,” he said.

Three-year annualised volatility

Source: FE Analytics

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