HEAD-TO-HEAD: Eastspring versus T Rowe Price

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

Performance

The T Rowe Price fund has outperformed not only the Eastspring product, but also its peers and its benchmark MSCI Europe index over the past three years.

Despite the market collapse in March, it has posted a positive 1.47% cumulative return since 21 April 2017, compared with -4.79% by the Eastspring fund and -1.87% by the benchmark and -6.76% for the European (including UK) sector average, according to FE Fundinfo data.

However, since the market nadir on 19 March, the Eastspring Pan European Fund has bounced 22.81%, outstripping the 18.85% rally by the T Rowe European Equity Fund, and the sector average (18.53%) as well as the index (17.13%).

Meakin is impressed with the performance of both funds, attributing their relative success to their managers.

“The T Rowe Price strategy has produced strong returns overall during Tenerelli’s tenure,” he said.

From 1 June 2009 to the end of December 2019, the fund outperformed the MSCI Europe index and the category average, and risk-adjusted returns were also ahead of both measures, according to Meakin.

“Performance has been achieved relatively consistently on a calendar-year basis in a mix of different climates, in line with our expectations of a style-agnostic approach that looks to add value through stock selection,” he said.

For example, having protected investors’ capital better than the index and peers in the falling market of 2011, the strategy then managed to capitalise on the upside as European stocks rallied in 2012 and 2013.

However, the fund did poorly in 2016, when Tenerelli stepped away from his bottom-up process and was swayed by macros concerns – notably Brexit.

“But, the manager has learned from this tricky period, and the strategy has returned to form since, outperforming both the index and its peers last year” said Meakin.

Meanwhile, the Eastspring fund has generated stronger absolute returns than the same benchmark and sector average since John Olsen arrived to manage the strategy in July 2014.

“Given the portfolio’s quality characteristics, the strategy should hold up better than peers in falling markets but potentially lag in strongly rising markets,” said Meakin.

“Yet, so far, it has not only exhibited a lower downside capture ratio, but also a higher upside capture ratio than those of the category average,” he said.

Stock selection is the key attribution factor, he believes.

For instance, the strategy enjoyed a very strong 2017 amid rising markets but underperformed in 2018 in a weaker market environment, with stock selection effects dominating in both years, according to Meakin.

Last year, it comfortably delivered better returns than the index and its peers, helped by strong stock selection in the communication services and consumer discretionary sectors, he said.

Discrete annual performance

Source: FE Fundinfo. Annual returns in US dollars.

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