HEAD-TO-HEAD: Franklin Templeton versus Legg Mason

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Conclusion

Both Morningstar and FE Fundinfo have given similar ratings for both products.

While Morningstar has awarded the Templeton fund two stars thanks to its capable and well-resourced team, it has voiced concerns around risk management.

Morningstar awarded the Legg Mason fund three stars based on its “broad, experienced and successful fixed income team” at Western Asset.

However, its consistently high-beta positioning makes for a bumpy ride for investors, Morningstar noted.

Morningstar gives both funds an analyst rating of neutral, while it rates cheaper share classes 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 two crowns to the Legg Mason fund, but only one crown to the Templeton product.

Poole believes that while both funds have clear processes and great managers supported by ample resources, these funds probably have different roles in a portfolio.

“Legg Mason might be suitable for a core diversified fixed income holding. It provides exposure to predominately developed market debt, but also has corporate and EM at levels that are suitable in a core holding.”

“In contrast, the concentrated, high-conviction process at Templeton probably lends itself to a smaller position within a diversified portfolio. It has potential for higher returns – and this may be the case in the near future if the Fed is able to avoid recession.”

He concluded by saying that both funds have attractive qualities that would be suitable for different investors and position sizing is important within a portfolio.

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