HEAD-TO-HEAD: Capital Group versus Franklin Templeton

123456

The Capital Group and Templeton funds versus their benchmarks and sectors in Hong Kong and Singapore. Source: FE Fundinfo. In US dollars. Note: The Capital Group fund’s custom blended benchmark index is not available on FE Fundinfo.

Performance

Given that Capital Group invests in both high yield and emerging market bond funds, the product has a risk of underperforming if either one asset class underperforms the fixed income market, according to Ge.

“If either high yield or emerging markets faces a sell-off, it is going to hurt,” he said.

“In recent weeks, we have seen a sell-off in high yield bonds, which is why the fund has not been doing well this year. Emerging market debt is also down this year, which makes it a double whammy for the fund.”

Discreet annual performance (%)

Source: FE Analytics. In US dollars.

However, if both emerging markets and high yield are up, Ge expects that the fund will outperform the market and its peers.

“Under normal circumstances, the fund should do better.”

Turning to the Templeton fund, Ge believes that while it does not participate in market rallies, it offers more downside protection for investors, especially in the current market environment.

“The fund currently has a large allocation to the Japanese yen, which has been traditionally considered as a safe haven asset.

“With markets under stress right now, you can see that it has held up better compared to the Capital Group fund,” he said.

However, he noted that investors should be aware that the Templeton fund’s returns usually deviate from the majority of its global bond peers.

“This is largely due to the contrarian style of the fund,” he said.

In terms of volatility, Ge believes that both funds are more volatile than their peers as both emerging market and high yield bonds are volatile asset classes within the fixed income universe.

Annualised volatility

Source: FE Fundinfo. In US dollars.

123456