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Differing strategies bring reversal of fortunes to SE Asia funds, says S&P

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The top performing rated fund during the first three months of 2009 was the S&P AAA rated Franklin Templeton Investment Funds – Templeton Asian Growth Fund with a return of 5.6 per

The top performing rated fund during the first three months of 2009 was the S&P AAA rated Franklin Templeton Investment Funds – Templeton Asian Growth Fund with a return of 5.6 per cent, according to an update from Standard & Poor’s Fund Services.

At the other end of the spectrum, one of the bottom performers was the S&P A rated Vontobel Fund – Far East Equity Fund with a loss of 7.1 per cent.

‘This was a reversal of the situation in 2008, when the Templeton Fund ranked in the bottom quartile and the Vontobel Fund in the top quartile,’ says S&P Fund Services lead analyst Alison Cratchley.

She says the key to the disparity in returns lay in sector positioning. Over the last few months, Allan Lam, manager of the Templeton fund, had increased holdings in aluminium, oil and gas and automobile manufacturing companies, taking the view that a recovery in Asia does not depend on a recovery in the US. As a result, the fund participated in the recent cyclical rally and Lam highlighted auto dealers as among the main contributors to returns.

In contrast, the Vontobel fund was biased away from cyclicals, being heavily overweight in consumer staples and utilities. This defensive positioning led to an underweight position in Taiwan, the first quarter’s best performing market and has been detrimental to performance.

Looking ahead, S&P Fund Services’ Alison Cratchley says managers are mostly cautiously optimistic on the outlook. They think that Asia will recover more quickly than many developed countries because it does not share the West’s structural problems.

Stuart Parks, manager of the S&P AA rated Invesco Asian Equity Fund, believes that Asian equity markets will be among the first to recover once a degree of clarity emerges on the macroeconomic outlook.

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