HEAD-TO-HEAD: Franklin Templeton versus Legg Mason

123456

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

Performance

Performances for both funds had been hurt when high yield bond prices plunged in the first quarter of 2020, with the Legg Mason fund reporting a cumulative return of -14.70% in late March 2020.

However, the fund rebounded to deliver positive returns before the first quarter of this year.

2022 has been painful for fixed income funds but Legg Mason has provided more downside protection, which is in line with historical outcomes, said Poole.

He pointed out that the Legg Mason fund’s performance has been consistent and it had delivered on its investment target over time.

Despite a challenging year, the fund’s security selection and asset allocation has provided some protection.

“While the fund can be volatile, it tends to outperform during credit up cycles, although interestingly has historically been quite good at protecting in down markets too,” Poole added.

On the other hand, the Templeton fund, which has a larger exposure to investment grade bonds, continued to suffer through the three-year period.

“The fund underperformed through 2022 to date,” said Poole.

“This is in line with history where the higher volatility of this fund has resulted in larger drawdowns than the market sometimes.”

He said the fund’s characteristic of having shorter duration, especially at the developed market government level and avoiding the worst of the corporate credit spreads widening helped its performance.

But holding a significant position in South Korean won (22.01%), Japanese yen (19.16%) and Indian rupee (15.57%) has hurt returns.

“Templeton’s long-term returns have suffered due to the challenging past 12 months,” he added.

“The challenge will be to have the portfolio well positioned to capture upside when it does come through.”

Discrete calendar year performance

Source: FE Fundinfo. Annual returns in US dollars. *1 Jan 2022 – 23 Sep 2022

123456