HEAD-TO-HEAD: Franklin Templeton versus Merian

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Investment approach

While both the Franklin Templeton and Merian funds invest in US equities, there are huge differences in terms of their investment process, according to Khizou.

One major difference is how the funds are managed. The Franklin Templeton fund employs traditional fundamental research for stock-picking, while the Merian product is a quantitative fund.

Because of that, their investment styles are also different. The Franklin Templeton fund has a growth-bias approach to investing, while the Merian fund is style-agnostic.

“The Franklin Templeton fund is your traditional bottom-up-driven approach. It is not benchmark-aware (its benchmark is the Russell 3000 Growth Index) and the manager seeks to identify firms poised to benefit from secular growth trends,” Khizou said.

In terms of stock-picking analysis, the fund managers of the product look at various quality and valuation criteria.

“They look to invest in companies that demonstrate accelerating cash flow and increasing earnings over the next three-to-five years,” she said.

The portfolio is diversified with 90 stocks, she added, but noted that the fund will have huge sector and individual stock concentrations.

For example, information technology accounts for 40% of the fund’s assets (see below). On the individual stock level, Amazon makes up nearly 8% of the portfolio.

Turning to the Merian fund, Khizou explained that the strategy is a “pure quant fund”, which looks at different factors. They are: market dynamics such as momentum trends and short-term signals; dynamic valuation, which enables the model to shift between value and quality to reflect changing market dynamics; sustainable growth factors; analyst sentiment and company management factors.

Like other quant funds, the number of holdings includes around 200 stocks, Khizou said.

“Also, in line with other quant strategies, the turnover can be quite high, at around 400%-500% per year.”

The Templeton and Merian funds also differ in market cap allocation. The Franklin Templeton fund tends to have a larger weighting toward large-cap companies, while the Merian fund allocates more to mid- and small-cap stocks.

Market cap allocation

Source: Morningstar

Sector allocation

Source: Fund factsheets

Top 10 holdings

Source: Fund factsheets

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