HEAD-TO-HEAD: First State versus Templeton

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The First State and Templeton funds versus their benchmark indices. Source: FE. In US dollars.

Performance

Poole explained that the funds behave differently under the same market conditions.

Given the First State fund’s quality bias, the fund has strong downside protection. In calendar year 2018, for example, it fared far better than its benchmark and the Templeton fund.

“In down markets, historically, the First State fund has had good outperformance.”

However, the product usually lags if there is a strong rally in the Asian equity markets.

“The type of companies that they invest in can often lag on that pick-up. So the upside capture, on the other hand, is not as strong as the broader market.”

Discreet annual performance

Source: FE Analytics

The opposite is true for the Templeton fund.

Given its higher allocation toward growth stocks, Poole said that the product will do well during the big market upswings. For example, in calendar year 2016 (chart above), it outperformed its benchmark as well as the First State fund.

“They’ve got exposure to cyclical and growth stocks and that means that the upside has been an opportunity for quite strong performance.”

However, the downside capture is also large when the market is down, according to Poole.

In terms of volatility, given that the First State fund is more resilient during down markets, he expects the product to be less volatile than the Templeton fund.

Three-year annualised volatility

Source: FE Analytics

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