Analysts Upgrade Templeton Asian Growth

Morningstar fund analyst Germaine Share explains why Templeton Asian Growth has been upgraded to a Neutral rating

Emma Wall 16 April, 2018 | 2:52PM
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Emma Wall: Hello, and welcome to the Morningstar series, "Ask the Expert." I'm Emma Wall and I'm joined today by Morningstar's Director of Fund Analysis Germaine Share.

Hi, Germaine.

Germaine Share: Hi, Emma.

Wall: So, we are here today to talk about the fact that you and your colleagues have upgraded a Templeton fund.

Share: We are talking about the Templeton Asian Growth Fund today.

Wall: What is the decision behind this upgrade?

Share: So, the fund was rated Negative under previous portfolio manager Allan Lam. And now that there has been a new management in place, Sukumar Rajah, we have upgraded the fund to a Neutral rating.

Wall: It's not just the manager change, is it, because under Lam there was some unimpressive performance?

Share: You are exactly right. So, I think, this ties again back into our rationale why we upgraded the fund. So, under him, him as a manager we were not very impressed by and also, we thought he was quite slow in terms of getting up to speed and improving risk management and focusing more on bottom-up stock selection. And as a result, going back to your question, you have seen the performance has been very lumpy, very volatile and in recent years there has been some really big drawdowns as well.

Wall: Because the size of the fund has significantly shrunk under his management, hasn't it, from a peak of around $10 billion to what was something much smaller today?

Share: That's a great point. So, I think at one point it was over $10 billion and now, as we are sitting here today, I think, it's more around the $3 billion to $4 billion mark.

Wall: And it's not enough just to put a new manager in place. There needs to be promise of change along with this. With this new manager, what happens to the process of this fund?

Share: Yeah, that's a great question. So, I think, I touched upon risk management before and the new manager now, he definitely has a more benchmark-aware approach. So, you won't be seeing a lot of chunky deviations from the benchmark in terms of the sector or the country level going forward. We also like that he now has a bigger emphasis on quality and intrinsic value. So, we will kind of expect the portfolio's quality to improve compared to Allan Lam's where he was focusing more on absolute value and you see him having a lot of low-quality cyclical stocks which is why it performed so badly last year.

Wall: Now, we talked about process and we talked about person and we talked about performance. What about parent, because Templeton is a house that is renowned for emerging markets, isn't it?

Share: That's exactly right. So, another key update here is that Mark Mobius officially retired at the end of January this year. And we've seen Templeton lay out a great succession plan. We've seen them promoting Stephen Dover as CIO. And now, specifically, for the emerging markets business they have a new CIO coming in called Manraj Sekhon. But he just came on board on md-February. So, we are looking forward to see what positive changes he will bring to the group.

Wall: So, it's watch this space for Templeton and indeed this fund?

Share: That's exactly right.

Wall: Germaine, thank you very much.

Share: Thanks, Emma.

Wall: This is Emma Wall for Morningstar. Thank you for watching.


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Templeton Asian Growth W(acc)USD13.32 USD-2.28Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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