HEAD-TO-HEAD: Capital Group versus Neuberger Berman

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PERFORMANCE

Jmili expects the Capital Group fund to provide downside protection whenever there is a downturn in markets, as the fund has a quality growth style in investing and a cash buffer.

“The cash is a positive thing when markets are rocky. However, it can also be a bit of a drag when markets are rallying. So that cash buffer can be both positive and negative depending on the circumstances,” she said.

For example, in 2019, the fund underperformed both its benchmark index, the S&P 500 and the Russell 3000 Index, according to Jmili.

Discreet annual performance (%)

Source: FE Fundinfo. In US dollars.

“What hurt the fund most was its cash allocation. The underweight to technology stocks also hurt the fund. Exposure to aerospace stocks, such as Transdigm, was also a detractor last year.”

Turning to the NB fund, Jmili expects the fund to also perform well in down markets, given that the fund manager is conscious of a company’s cash flow generation. However, Jmili believes that the offering is not as defensive as the Capital Group fund.

“It is not as defensive as the Capital Group fund because it doesn’t hold that big cash buffer,” she said.

“Like the Capital Group fund, the NB offering will trail a bit during speculative bull markets,” she added.

In terms of volatility, Jmili expects the Capital Group fund to be less volatile than the NB product.

“The NB fund has a more concentrated portfolio, which explains its volatility. When you have a few stocks blowing up or not playing out well as expected, it really changes the potential return of the product and brings the portfolio more volatility,” she said.

Three-year annualised volatility

Source: FE Fundinfo.

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