HEAD-TO-HEAD: Franklin Templeton versus JP Morgan

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Luke Ng, FE Advisory Asia

Introduction

Since the start of this year, a number of asset and wealth managers have turned positive on Asia bonds in the wake of the US Federal Reserve’s shift to a dovish interest rate stance.

The managers include Blackrock, Fidelity, JP Morgan Asset Management and Standard Chartered Private Bank, which all cited stable economic fundamentals and cheap bond valuations relative to US and European credit.

The outlook also appears positive across sub-asset classes.

In the investment grade (IG) space, for example, Asian IG corporate bonds in aggregate offer better credit spreads than either US IG or European IG, according to Manu George, senior investment director for Asian fixed income at Schroders.

In the high yield space, some managers, such as Jupiter Asset Management, said they have profited from the sub-asset class earlier this year. However, high yield has now become more expensive, and therefore IG is preferred.

“2018 was not a good year for Asian fixed income, but it has seen a strong rally in the first half of this year,” said Luke Ng, Hong Kong-based vice president at FE Advisory Asia.

“There is still potential for Asian fixed income in the long-run. But at the same time, returns at this point will probably rely more on investor demand rather than fundamentals, given the strong rally this year.”

Against this backdrop, FSA asked Ng to compare two Asia fixed income products: The Franklin Templeton Asian Bond Fund and the JP Morgan Asian Total Return Bond Fund.

Source: FE Analytics, Morningstar

*05 August 2016 – 07 August 2019

**06 August 2016 – 02 August 2019

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