HEAD-TO-HEAD: Franklin Templeton versus Legg Mason

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Source: FE Fundinfo. In US dollars. Note: the benchmark indices of the Franklin Templeton Fund (the JPM GBI-EM  Broad Diversified Asia Index) and the Legg Mason fund (the Markit iBoxx Asian Local Bond Index) is not available on FE.

Performance

Given that the Franklin Templeton fund invests only in sovereign bonds, it is much less volatile when compared with the Legg Mason fund, according to Ge.

Three-year annualised volatility

Source: FE Fundinfo

“The Legg Mason fund is more volatile, and part of that is its allocation to corporate bonds, which are more sensitive to market movements,” he said.

However, he noted that the lower volatility of the Franklin Templeton fund does not mean that it can provide more downside protection to investors.

“Government debt should provide more stability. But the fund takes sizable off-benchmark bets, so its performance tends to seesaw when compared with its peers.”

He added that on a three-year annualised basis, the Legg Mason fund has provided better risk-adjusted returns, with a Sharpe ratio of 0.25, which compares with Franklin Templeton’s Sharpe ratio of -0.24.

He explained that the Legg Mason product’s allocation to corporate bonds can boost the fund’s returns during strong credit rallies.

“Last year, corporates did very well, which jacked up the returns of the Legg Mason strategy.

“But it could also hurt the fund when there is a sell-off in the market, such as what happened this year,” he said.

Discreet annual calendar performance

Source: FE Fundinfo. In US dollars.

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