HEAD-TO-HEAD: Franklin Templeton versus Legg Mason

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Isaac Poole, Oreana Financial Services

Introduction

The tough macro environment this year due to tightening monetary policy, geopolitical tensions and an economic slowdown has hampered most asset classes with fixed income being no exception.

In particular, rising policy rates, increasing government bond yields and widening credit spreads have led to the underperformance of the asset class since the beginning of this year.

However, there are signs that investors are willing to stick with the asset class.

In June, Oreana Financial Services changed its view on duration to neutral from highly underweight, while the recent higher move in treasury yields has made duration even more attractive.

In his fourth quarter outlook, JP Morgan Asset Management chief market strategist for Asia Pacific, Tai Hui, said he favours fixed income instruments over equity as downside risk to growth continues to loom.

He also prefers investment grade over high-yield corporate credit as there is still a potential risk of a recession and increasing default risk.

Hui’s views are echoed by Invesco’s global markets strategist for Asia Pacific ex-Japan, David Chao, who prefers fixed income, especially investment grade bonds, over other asset classes.

In the high-yield universe, T Rowe Price believes the fundamentals for the asset class are stronger than ever and will generate a decent yield for the rest of the year, due to corporates’ strong earnings and balance sheets.

Against this backdrop, FSA asked Isaac Poole, chief investment officer at Oreana Financial Services to select two international fixed income funds for comparison. He chose: the Templeton Global Total Return Fund and the Legg Mason Wester Asset Global Multi Strategy Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 16 September 2022)

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