HEAD-TO-HEAD: Blackrock versus Capital Group

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Source: FE Fundinfo. Three-year cumulative returns in US dollars.

PERFORMANCE

“The Blackrock fund was transformed into its current ESG process only in March 2019, but in the short period since the change, the fund has performed well,” said Möttölä.

Over three years, it has generated a 32.19% cumulative return, more than double the return of the average mixed asset (international) fund available to Hong Kong retail investors, according to FE Fundinfo. Its annualised volatility is also a lot lower during the period, at 9.24% compared with 11.57%.

The fund has done better than its peers during each of the last three calendar years, even during the downturn in 2018, FE Fundinfo data shows.

In the coronavirus-driven turbulence of the first quarter of 2020, the fund saw excess returns especially from BlackRock’s systematic equity portfolio, as well as its overweighting in the US and shorts in Europe. In addition, its long volatility bets were successful, and with some of its hedges removed, the fund “profited handsomely from the rebound in US growth stocks,” said Möttölä.

Risk-adjusted returns have been appealing at the Capital Group fund, as indicated by an above-average upside-capture ratio and a higher resilience in drawdowns, including in the first-quarter turbulence of 2020 when the fund saw smaller losses than its average peer, according to Möttölä.

The fund has posted a three-year cumulative return of 19.72%, FE Fundinfo data shows. It has outperformed its peer average in every calendar year for the past five years, except 2017 –  but it has typically underperformed the Blackrock product.

“While asset allocation has been a slight drag over the history of the fund, stock selection has been beneficial overall, especially in 2015, 2017, and 2019,’ he said.

The over-weightings in Amazon and Microsoft were the largest contributors in 2015, while in 2017 Nintendo and ASML were among the best-performing stocks. In 2019 the fund profited from selection, particularly within industrials, including Airbus. However, not holding some big tech names such as Apple and Facebook hurt, according to Möttölä.

On the fixed-income side, security selection had a positive effect in 2018 and 2019, mostly from exposure to government bonds, he added.

In 2019 and early 2020 Blackrock was slightly better off, especially in early 2020, and Capital Group also dropped more during the Covid-turbulence, according to Möttölä.

In March 2020, Blackrock had also better success partly due to some volatility trading, but “we would need to see more to have confidence that this is repeatable,” concluded Möttölä.

Discrete calendar year performance

Source: FE Fundinfo. Annual returns in US dollars. *31 Dec 2020 – 26 Feb 2021

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