The £10.5m Templeton Global Emerging Markets fund continues to act as a blight on the track record of emerging market veteran Mark Mobius, as FE Trustnet research suggests it has been one of its sector’s worst funds for a range of performance and risk metrics over recent years.
In an ongoing series, we have been highlighting the funds have the highest decile rankings for the cumulative five-year returns up to the end of 2015 as well as the annual returns of 2015, 2014 and 2013, annualised volatility, maximum drawdown, downside capture, alpha generation, Sharpe ratio and upside capture.
After these 10 decile rankings are added together make a total score, a ‘10’ shows a fund has been first decile in each metric and a ‘100’ would indicate 10th decile performance in each. This methodology has now been applied to the IA Global Emerging Markets sector.
Templeton Global Emerging Markets comes out at the bottom of this analysis after scoring 99. This was the result of bottom-decile numbers in every metric aside from upside capture (capturing 90 per cent of market upswing means it’s in the ninth decile).
Performance of fund, manager, sector and index over 5yrs to end of 2015
Source: FE Analytics
The graph above, which spans the 1 January 2011 to 31 December 2015 period covered in this study, shows how the fund’s total returns have been much lower than results achieved by the manager across his portfolios. Mobius also works on the Templeton Emerging Markets investment trusts, Templeton Emerging Markets Smaller Companies fund and Templeton Frontier Markets as well as a number of country or region-specific portfolios.
Templeton Global Emerging Markets has underperformed the MSCI Emerging Markets index in nine of the past 10 full calendar years. The exception was in 2009, when its 70.95 per cent total return was much higher the 58.93 per cent made by the index or the 57.22 per cent gain by the average IA Global Emerging Markets fund.
The fund has been highlighted for its poor performance on a number of occasions, for instance being an almost permanent feature on Chelsea Financial Service’s RedZone – its list of persistent underperformers – over the past few years.
It has, however, jumped into the top decile of the year over 2016 so far, benefiting from the rebound in emerging market equities and a degree of resurgence in the value investing style, which had been out of favour for some time.
The table on the following page reveals the 15 IA Global Emerging Markets funds with the worst scores in our research.
Source: FE Analytics
Oyster Emerging Opportunities, which is managed by Acadian Asset Management’s John Chisholm and Patrick McCafferty, is in the bottom decile of the peer group for every metric aside from its performance in 2013. This gives it a score of 93.
In 2013, the $49.7m fund made a 0.22 per cent loss, which put it in the third decile after its average peer fell 3.84 per cent and the index dropped 4.41 per cent. This was not enough to pull it out of the 10th decile for cumulative returns over five years, however.
Performance of fund, sector and index over 5yrs to end of 2015
Source: FE Analytics
The fund uses the SYZ EM Index as its benchmark. This is built in-house by SYZ & CO Group (which owns Oyster Funds) and is equally weighted between the 21 countries that comprise the MSCI Emerging Markets index; the argument is that it gives a more balanced approach to emerging market investing, as the MSCI index is dominated by China, South Korea, Brazil, Taiwan and South Africa.
Like the Templeton fund, Oyster Emerging Opportunities has rebounded somewhat over the opening five months of 2016 and has made 9.16 per cent – putting it in the second quartile of the sector.
The £82.1m NFU Mutual Global Emerging Markets fund, managed by Matthew Bennett, is the only other fund to be assigned a score of 90 or higher in this research.
It has a much better track record in capturing the market upside than the other funds mentioned so far. Indeed, it has tended to rally faster than MSCI Emerging Markets index when the market is rising, unlike the Templeton and Oyster offerings.
Like the other two, it has had a strong start to 2016. FE Trustnet will take a look at this trend in a coming article to ask whether a change in market leadership is taking place or if these turnarounds (which can be seen in other sectors) is more of a short-term blip.
Not all the funds on the list have smaller assets under management like the above products. Capital International Emerging Markets is £976.9m in size while Scottish Widows Emerging Markets is running £914.4m of investors’ money.
Performance of funds, sector and index over 5yrs to end of 2015
Source: FE Analytics
While both of these funds have underperformed the benchmark over the five years in question, they have respective scores of 78 and 77 – meaning they are in the 10th decile for fewer metrics than some funds on the list.
