HEAD-TO-HEAD: Fidelity versus Templeton

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Conclusion

Morningstar has awarded the Fidelity fund three stars based on historical returns, and a bronze analyst rating. The firm rates the Templeton fund the same with three stars, and a forward-looking analyst rating of neutral.

FE Fundinfo, which bases its assessment on a fund’s three-year history of delivering alpha, minimising relative volatility and producing consistent returns, awards the Fidelity fund two crowns and one crown for the Templeton fund.

Based on the ratings, Ge said he prefers the Fidelity fund over the Templeton fund.

For the process pillar, the Fidelity fund is rated above average by Morningstar, whereas the Templeton fund is rated average.

“We downgraded the Templeton fund process rating from above average to average in 2019. That was mainly on the basis that we thought the Templeton fund was quite concentrated in terms of its portfolio on top of an already aggressive approach, which goes back to the high conviction, benchmark agnostic investment style that the managers execute,” Ge said.

The Templeton fund has had higher concentrated bets, and some of these bets have not worked out in the last several years. “And that points to some deeper-rooted research capability and potentially risk management challenges.”

The Fidelity fund is rated above average.

“We cover quite a few Fidelity products, such as the Fidelity Asian Bond Fund and the Fidelity Asian High Yield Fund, which have similar investment approaches that combine top-down analysis with bottom-up research,” said Ge.

“Fidelity funds challenge consensus at times. However, this has added value to not only this fund, but also other funds, which has increased Morningstar’s conviction about the investment process over time,” Ge concluded.

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