TEMMX
Templeton Emerging Markets SmallCap-A
Exploring the Growth Potential of TEMMX
Templeton Emerging Markets SmallCap-A (TEMMX) is designed for investors seeking long-term capital appreciation by investing in small-cap companies within emerging markets. The fund’s strategy focuses on capturing growth opportunities in regions such as Asia-Pacific, Eastern Europe, the Middle East, Central and South America, and Africa. With a significant portion of its assets allocated to non-U.S. equities, TEMMX provides investors with exposure to diverse and rapidly developing economies. The fund’s objective aligns with growth-oriented investors who are willing to accept higher volatility in exchange for the potential of substantial returns. This focus on small-cap stocks in emerging markets positions TEMMX as a unique offering within the Franklin Templeton Investments family, catering to those looking to diversify their portfolios with high-growth potential assets.
At A Glance
Executive Summary
TEMMX offers exposure to small-cap stocks in emerging markets with a 2.75% yield, but has a higher expense ratio of 1.76%.
Exposure to high-growth emerging markets; Focus on small-cap companies; Diversified sector allocation.
Higher expense ratio compared to peers; Negative recent performance metrics; High volatility in emerging markets.
Performance Analysis: Navigating Volatility
TEMMX has demonstrated a mixed performance over various time frames, reflecting the inherent volatility of emerging markets. Over the past year, the fund achieved a notable return of 16.76%, slightly underperforming its benchmark, the MSCI ACWI xUS DivAdj Index, which returned 17.25%. However, the fund’s three-year annualized return stands at -0.92%, indicating challenges in maintaining consistent performance. The fund’s beta of 0.87 suggests it is less volatile than the market, yet its negative alpha of -0.51% and Sharpe ratio of -0.05 highlight the difficulties in achieving risk-adjusted returns. Investors should consider these metrics when evaluating the fund’s potential to deliver consistent growth amidst market fluctuations.
Sector Allocation: A Diverse Portfolio
TEMMX’s sector allocation reveals a strategic emphasis on financials, which constitute 23.82% of the portfolio, followed by technology at 18.79% and cyclical sectors at 20.97%. This diversified sector exposure aims to balance growth potential with risk management. The fund’s allocation to financials and technology sectors reflects a focus on industries that are pivotal to the economic development of emerging markets. Additionally, the fund’s exposure to healthcare (11.70%) and industrials (7.28%) further diversifies its investment base, providing a buffer against sector-specific downturns. This strategic allocation is designed to capitalize on the growth trajectories of various sectors within emerging markets, offering investors a well-rounded approach to capturing market opportunities.
Comparative Analysis: TEMMX vs. Peers
When compared to similar funds, TEMMX presents a competitive yet challenging profile. Its expense ratio of 1.76% is higher than peers such as Virtus KAR Emerging Markets SmallCap-A (VAESX) and Harding Loevner Frontier Emerg Mkts-Inst (HLFMX), which have lower expense ratios of 0.0179% and 0.0174%, respectively. Despite this, TEMMX’s yield of 2.75% is attractive compared to the 0.24% yield of William Blair Emerging Market SmCp Gr-I (BESIX). However, the fund’s one-year return of 16.76% lags behind the 23.02% return of AB Emerging Markets Multi-Asset-A (ABAEX). Investors should weigh these factors, considering both cost and performance, when deciding if TEMMX aligns with their investment goals.
Risk Metrics: Understanding the Downside
TEMMX’s risk metrics provide insight into the potential challenges investors may face. The fund’s standard deviation of 2.96% and downside risk of 1.89% indicate moderate volatility, while the max drawdown of -7.2% highlights the potential for significant losses during market downturns. The fund’s Treynor ratio of -0.58 further underscores the challenges in achieving positive returns relative to its risk exposure. Despite these risks, the fund’s correlation with its benchmark at 95.96% suggests a strong alignment with broader market movements, which can be advantageous for investors seeking exposure to emerging markets. Understanding these risk metrics is crucial for investors to assess the fund’s suitability within their risk tolerance and investment strategy.
Top Holdings: Key Contributors to Performance
The top holdings of TEMMX play a significant role in shaping its performance. Bajaj Holdings and Investment Ltd, with a 6.41% allocation, is the largest holding, followed by FPT Corp at 4.35% and International Container Terminal Services Inc at 3.71%. These companies represent key sectors within emerging markets, contributing to the fund’s growth potential. The presence of technology and financial companies among the top holdings aligns with the fund’s sector allocation strategy, emphasizing industries with strong growth prospects. Additionally, the inclusion of companies like Zomato Ltd and Novatek Microelectronics Corp highlights the fund’s focus on innovative and rapidly expanding businesses. These holdings are instrumental in driving the fund’s performance and offer insight into its investment strategy.
Market Cap Allocation: Balancing Growth and Stability
TEMMX’s market cap allocation is predominantly focused on medium-sized companies, which make up 49.53% of the portfolio. This focus on medium-cap stocks provides a balance between the growth potential of small-cap companies and the stability of larger firms. Large-cap stocks account for 32.80% of the portfolio, offering a degree of stability and reduced volatility. The fund’s allocation to small-cap stocks at 12.41% underscores its commitment to capturing high-growth opportunities within emerging markets. This strategic distribution across different market capitalizations allows TEMMX to leverage the growth potential of smaller companies while maintaining a stable investment base through larger, more established firms.
Conclusion: Is TEMMX Right for You?
TEMMX stands out as a compelling option for investors seeking exposure to small-cap stocks in emerging markets. Its focus on growth and diverse sector allocation make it suitable for those willing to embrace higher volatility for the potential of substantial returns. However, the fund’s higher expense ratio and recent performance challenges may deter cost-conscious investors. For those with a long-term investment horizon and a tolerance for risk, TEMMX offers a unique opportunity to diversify portfolios with high-growth potential assets. Investors should carefully consider their investment goals and risk tolerance when evaluating TEMMX as part of their broader investment strategy.
Similar Securities
PAIJX: Em Mkts Discv Stk Adv | Emerging Markets Growth Fund
PAIJX focuses on undervalued large-cap stocks in emerging markets, offering a 2.51% yield. It stands out with a diversified portfolio and growth potential.
FCEEX: Franklin Emerging Market Core Equity-Adv | Emerging Markets Growth Fund
FCEEX offers diversified emerging market exposure with a competitive 0.17% expense ratio and strong 18.07% 1-year return.
HEMAX: Janus Henderson Emerging Markets-A | Growth in Emerging Markets
HEMAX focuses on emerging markets with a tech-heavy portfolio, offering potential growth but higher risk, with a 1.38% expense ratio.
GTDDX: Invesco EQV Emerging Markets AllCap-A | Diversified Emerging Markets Fund
GTDDX offers diversified emerging market exposure with a 1.34% expense ratio and 1.51% yield, focusing on growth in non-US equities.
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%.
Futher Reading
https://www.morningstar.com/funds/xnas/TEMMX/quote
https://finance.yahoo.com/quote/TEMMX/”>Yahoo: Templeton Emerging Markets SmallCap-A
https://ftcloud.fasttrack.net/web/chart/TEMMX
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