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Templeton fund ends reign in Asia as top picks falter

[SINGAPORE] Templeton Asian Growth fund, managed by star stock picker Mark Mobius, ended its six-year reign as the biggest equity fund in Asia ex-Japan after suffering a second straight quarter of investor withdrawals and underperforming its benchmark.

Asia-focused funds have broadly shrunk in the past year due to concerns about capital outflows in the run-up to higher US interest rates. In the case of Templeton Asian Growth fund, investors yanked out a net US$500 million in January-to-March for the second straight quarter. The fund shrank to US$11.8 billion in size, putting it behind the US$12.2 billion First State Asia Pacific Leaders fund, according to Lipper, a unit of Thomson Reuters. The Templeton fund returned 1.96 per cent, less than the 4.90 per cent returns of the MSCI All Country Asia ex-Japan index, partly due to its substantial allocations in energy and Thai equities.

Templeton is the biggest foreign investor in Thai stocks. Mobius has been bullish on the Southeast Asian nation for years, with the fund's Thailand equity allocation rising to 29 per cent from about 26 per cent in mid-2014 despite the military coup last year. By contrast, the allocation of Thai stocks in the MSCI All Country Asia ex-Japan index was 2.9 per cent. The Thai benchmark rose just half a percent in the first quarter due to the slowing economy. "Notwithstanding the political uncertainty, Thailand has a large middle class and a growing consumer population, which we believe bodes well for the economy over the longer term," Mr Mobius wrote on his blog in January.

Templeton, part of US-listed Franklin Resources Inc, said it does not comment on the performance of individual funds, adding that it takes a long-term view of investments. As of March 31, 98.86 per cent of the fund was invested in equities and 1.14 per cent in cash and cash equivalents.

Around 23 per cent of Templeton Asian Growth's equity portfolio was allocated to energy, which has been hurt since oil prices entered a downtrend last year. By comparison, the weighting of the volatile sector in the MSCI benchmark was small, at 4.8 per cent. Among the fund's major holdings are Pakistan's Oil & Gas Development Co (OGDC) and Thai PTT Pcl. OGDC slumped 12 per cent in the first quarter, while PTT and several other top 10 picks were nearly flat. The fund has reduced the share of energy in its equity portfolio from nearly 27 per cent in mid-2014. India's Oil & Natural Gas Corp, down 9.4 per cent in Mumbai this year, has fallen off the fund's top 10 holdings.