TEDMX
Templeton Developing Markets-A
Introduction to Templeton Developing Markets-A
Templeton Developing Markets-A (TEDMX) is a mutual fund designed to capture long-term capital appreciation by investing predominantly in equity securities of developing market countries. With a focus on emerging markets, the fund allocates at least 65% of its assets to these regions, as defined by global institutions like the World Bank and the United Nations. Managed by Franklin Templeton Investments, TEDMX is categorized under the Emerging Markets sector, aiming for growth through strategic investments in high-potential markets. The fund’s objective is to leverage the economic growth and development in these regions, offering investors a chance to benefit from the dynamic and often volatile nature of emerging markets.
At A Glance
Executive Summary
TEDMX offers exposure to emerging markets with a focus on technology and financials, providing a 3.58% yield and a high-risk, high-reward profile.
Exposure to high-growth emerging markets; Strong technology sector allocation; Competitive yield of 3.58%.
Higher expense ratio at 1.39%; Negative recent performance metrics; High volatility with a beta of 1.29.
Performance Analysis: Navigating Volatility
TEDMX has shown a mixed performance over various time frames, reflecting the inherent volatility of emerging markets. The fund’s one-year return stands at 16.55%, slightly underperforming its benchmark, the MSCI ACWI xUS DivAdj Index, which returned 17.25% over the same period. However, the fund’s three-year annualized return is -3.23%, indicating challenges in maintaining consistent growth. The ten-year return of 3.68% suggests moderate long-term performance, while the inception return of 5.83% highlights its potential for growth over extended periods. Investors should be aware of the fund’s high beta of 1.29, which indicates greater volatility compared to the market, and a negative alpha of -0.72%, suggesting underperformance relative to its benchmark.
Sector Allocation: A Strong Focus on Technology
TEDMX’s portfolio is heavily weighted towards the technology sector, which comprises 32.35% of its holdings. This significant allocation reflects the fund’s strategy to capitalize on the rapid technological advancements and digital transformation occurring in emerging markets. Key holdings in this sector include Taiwan Semiconductor Manufacturing Co Ltd and Samsung Electronics Co Ltd, which are leaders in the global tech industry. The financial sector also plays a crucial role, accounting for 25.42% of the portfolio, with major investments in ICICI Bank Ltd and HDFC Bank Ltd. This dual focus on technology and financials positions TEDMX to benefit from both the digital revolution and the financial growth in developing economies.
Comparative Analysis: How TEDMX Stacks Up Against Peers
When compared to similar funds, TEDMX presents a unique profile with its focus on emerging markets. Its expense ratio of 1.39% is higher than peers like WCMEX and APHEX, which have lower expense ratios of 0.0125 and 0.0101, respectively. In terms of performance, TEDMX’s one-year return of 16.55% is lower than WCMEX’s 21.41% and AEMMX’s 18.54%. Despite these challenges, TEDMX offers a competitive yield of 3.58%, which is higher than many of its peers. This makes it an attractive option for investors seeking income alongside growth potential. However, the fund’s higher beta indicates a riskier investment compared to its peers, which may deter risk-averse investors.
Risk Metrics: Understanding the Volatility
Investors considering TEDMX should be aware of its risk metrics, which highlight the fund’s volatility and potential for both gains and losses. The fund’s beta of 1.29 suggests it is more volatile than the market, which can lead to significant price fluctuations. The Sharpe Ratio of -0.04 indicates that the fund has not been able to generate positive returns relative to its risk, while the Treynor Ratio of -0.56 further underscores its challenges in achieving risk-adjusted returns. The fund’s standard deviation of 4.81% and downside risk of 3.28% reflect the potential for substantial drawdowns, as evidenced by its maximum drawdown of -10.4%. These metrics suggest that TEDMX is best suited for investors with a high risk tolerance.
Top Holdings: Key Drivers of Growth
The top holdings of TEDMX are pivotal in driving its growth and performance. Taiwan Semiconductor Manufacturing Co Ltd is the largest holding, making up 12.36% of the portfolio, and is a key player in the global semiconductor industry. Other significant holdings include ICICI Bank Ltd and Alibaba Group Holding Ltd, which represent 5.20% and 4.52% of the portfolio, respectively. These companies are leaders in their respective industries and are well-positioned to benefit from the economic growth in emerging markets. The fund’s focus on large-cap companies, which constitute 62.95% of the portfolio, provides a level of stability and potential for capital appreciation, aligning with the fund’s growth objective.
Market Cap and Asset Allocation: A Balanced Approach
TEDMX employs a balanced approach in its market cap and asset allocation, with a significant emphasis on large-cap stocks, which account for 62.95% of the portfolio. This focus on large-cap companies provides a degree of stability and reduces the overall risk associated with investing in emerging markets. The fund also maintains a small allocation to medium-cap stocks at 10.66%, allowing for exposure to companies with high growth potential. In terms of asset class allocation, TEDMX is predominantly invested in non-U.S. equities, which make up 96.49% of the portfolio, reflecting its commitment to capturing growth in developing markets. The fund’s minimal cash allocation of 2.02% indicates a strong focus on equity investments, aligning with its growth-oriented strategy.
Conclusion: Is TEDMX Right for Your Portfolio?
TEDMX stands out as a compelling option for investors seeking exposure to emerging markets with a focus on growth. Its strong allocation to technology and financial sectors, coupled with a competitive yield of 3.58%, makes it an attractive choice for those willing to embrace higher risk for the potential of higher returns. However, the fund’s higher expense ratio and volatility metrics suggest it may not be suitable for risk-averse investors. Those with a long-term investment horizon and a high risk tolerance may find TEDMX to be a valuable addition to their portfolio, offering the opportunity to capitalize on the dynamic growth of developing economies.
Similar Securities
OEMAX: Invesco Emerging Markets Local Debt-A | Emerging Market Debt Investment
OEMAX offers a 6.53% yield with exposure to emerging market debt, suitable for risk-tolerant investors seeking diversification.
MAECX: BlackRock Emerging Markets x-China-Inst | Growth in Emerging Markets
MAECX focuses on emerging markets excluding China, with a strong tech allocation and large-cap bias, offering a 2.56% yield.
PAELX: TRPrice Emerging Mkt Local Currency-Adv | High Income & Growth Potential
PAELX offers a 6.07% yield with a focus on emerging market bonds, providing high income and growth potential despite a higher expense ratio.
DODEX: Dodge & Cox Emerging Markets Stock | Diversified Growth in Emerging Markets
DODEX offers diversified emerging markets exposure with a competitive 0.70% expense ratio and strong 1-year return of 18.86%.
FEMDX: Franklin Emerging Market Debt Opportunity | High Return Emerging Markets Bond Fund
FEMDX offers a 19.82% 1-year return with a focus on emerging market debt, providing high growth and income potential with a 1.02% expense ratio.
Futher Reading
https://finance.yahoo.com/quote/TEDMX/”>Yahoo: Templeton Developing Markets-A
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