The FSA Spy market buzz – 24 March 2023
Bitcoin rolling futures, new fund pricing models gather pace, greenbleaching, sustainable bonds (not), thematic investing at the top; consultant jokes, Munger’s wisdom and much more.
During the first quarter, fixed income funds sold in Hong Kong and Singapore had the highest capital outflows of all asset classes, reaching $38.8bn, according to a report published by Morningstar.
The bulk of the outflows came from the riskier parts of the asset class, which include global emerging markets and high yield corporate bonds.
The outflows “were a mirror-image of the seemingly endless hunt for yield in the post-financial-crisis era, which had funds focused on the riskier parts of the global fixed income markets”, the report noted.
In contrast, and surprisingly, equity funds experienced comparatively less outflows of $10.3bn in the first quarter, according to the report.
Looking at the Hong Kong universe specifically, numbers from the Hong Kong Investment Funds Association show that SFC-authorised fixed income products were largely hit, reaching outflows of $6.1bn.
Most of the outflows came from global fixed income strategies (net outflows of $2.7bn), followed by Asia-focused products (-$1.89bn).
On the other hand, equity funds sold in Hong Kong had net inflows of $166.5m, led by sector funds.
Against this backdrop, FSA asked Patrick Ge, Hong Kong-based analyst for manager research at Morningstar, to compare two Asia fixed income products: the Templeton Asia Bond Fund and the Legg Mason Western Asset Asian Opportunities Fund.
Although the two funds are competing with each other for assets, Franklin Templeton in February said it would acquire Legg Mason for $4.5bn. The acquisition is still in process, and Franklin Templeton has said that the autonomy and identity of Legg Mason’s affiliates will remain unchanged.
|Franklin Templeton||Legg Mason|
|Manager||Michael Hasenstab, Vivek Ahuja||Desmond Soon, Swee Cing Lim|
|Three-year cumulative return*||-0.31%||9.59%|
|Three-year annualised return**||0.16%||2.64%|
|Three-year annualised alpha**||0.40||0.77|
|Three-year annualised volatility**||4.5||5.49|
|Morningstar analyst rating||**||****|
|Morningstar star rating||Neutral||Bronze|
|FE Crown fund rating||*||****|
Part of Mark Allen.