76% Returns, Low Stability — What Asian Equity Funds Look Like Under the Hood

HSBC Global Emerging Markets returned 76% in a year. Franklin Asian Equity returned 52%. Both score Low on FundMatrix Stability. And investors are piling in.

When a fund returns 76% in a year, it's easy to assume everything is working. The numbers look compelling, the fund appears in top-performer lists, and investors take notice — and money follows.

Two funds generating exceptional 1-year returns tell this story clearly: HSBC Global Emerging Market Fund Direct Growth (+76% CAGR) and Franklin Asian Equity Fund Direct Growth (+52% CAGR). Both are riding the Asian and emerging market rally of 2025-26. Both score Low on FundMatrix Stability.

Not Moderate. Not Below Average. Low.

The Numbers

The 1-year Sharpe ratios are genuinely strong. Max drawdown over the last 12 months was contained. On a trailing basis, both funds look like well-managed, high-performing portfolios.

So why does FundMatrix score them Low?

Stability Is Not a 1-Year Metric

The FundMatrix Stability Score evaluates consistency across a fund's full history — not just the most recent 12 months. It asks whether returns, volatility, drawdowns, and risk-adjusted performance have been reliable across different market conditions over time.

On return consistency, both funds score poorly. Returns across rolling periods have been highly variable — strong in bull markets, deeply negative when Asia and emerging markets fell out of favour. Fewer than 55% of rolling periods across the fund's history beat a reasonable return threshold.

On risk-adjusted stability, both funds show the deepest weakness. The Sharpe ratio has swung wildly across periods: exceptional in 2020-21 and again in 2025-26, but deeply negative during the 2022-23 EM downcycle. The current strong Sharpe is real — it simply follows extended periods where it was not.

On drawdown resilience, the full history tells a longer story. Franklin Asian Equity's longest single drawdown lasted nearly three years. Average recovery time per drawdown episode has been over 40 days. HSBC Global Emerging Markets spent over two years underwater during the post-2021 EM selloff. These numbers sit behind the clean-looking trailing 12-month figures.

Both funds score better on scale and momentum — AUM has grown for four consecutive quarters with consistent positive inflows. This is actually the dimension driving the modest 6-month stability improvement both funds have shown. But it also points to the concern.

Investors Are Chasing the Rally

The AUM data makes the return-chasing dynamic explicit.

HSBC Global Emerging Markets Direct had ₹16.56 Cr in AUM as of December 2024. By March 2026 — just 15 months later — that had grown to ₹135.2 Cr. An 8x increase. The fund had ₹2.26 Cr in December 2022, at the bottom of the EM downcycle when returns were poor and the stability score was at its lowest.

Franklin Asian Equity tells a similar story. Total AUM (across all variants) stood at ₹232 Cr in March 2024. By March 2026 it reached ₹384 Cr — up 65% in two years, with the bulk of the growth concentrated in the last two quarters as the Asian rally accelerated.

This is classic performance-chasing behaviour: money flows in after the returns have already been made, at precisely the point when the macro conditions driving those returns may be due for a reversal.

What the Pulse History Shows

Franklin Asian Equity's monitoring history is instructive. In April 2022, as emerging markets sold off and the fund's stability declined, FundMatrix flagged it as a persistent decline signal — a yellow alert indicating the deterioration was not a one-week blip but a sustained pattern. That alert stayed active through June 2022. Then in early 2024, the same pattern repeated: another multi-week deterioration signal as stability dropped to its lowest recorded level.

The current period of strong returns and improving stability follows two distinct multi-month deterioration episodes. The score today is higher than the 2024 trough — but the fund has not yet recovered to where it stood before the 2022 selloff.

Why This Matters

Asian and emerging market equities have rallied sharply in 2025-26. China stimulus, a weakening dollar, and global risk appetite have driven exceptional returns for funds with heavy EM and Asian exposure. These are macro-driven returns — the result of a favourable external environment, not evidence of consistent fund management quality across different market cycles.

When that environment was unfavourable — 2022 through much of 2024 — these same funds spent months in drawdown, triggering monitoring alerts, and scoring in the low-to-mid 30s on stability.

A Low stability score does not mean these funds are bad investments. It means their performance is highly dependent on macro conditions, their return history has been inconsistent, and their drawdown profile over the full history is materially worse than the trailing 12 months suggest.

If you are an investor who understands that Asian and EM equity funds are inherently cyclical, accepts the volatility, and is positioned for a long holding period through different market cycles — the stability score simply confirms what you already know about the category.

If you saw the 1-year return and assumed consistent quality — this is the signal worth reading carefully before the next cycle begins.

FundMatrix monitors both funds weekly. The score will reflect improvement if stability continues building. It will also flag deterioration early if the macro tailwind reverses — before the trailing return figures catch up.

View HSBC Global Emerging Market Fund on FundMatrix · View Franklin Asian Equity Fund on FundMatrix

FundMatrix Stability Scores update every Sunday. This is not investment advice. Mutual fund investments are subject to market risk.

Explore the data behind this analysis

FundMatrix tracks 15,000+ funds with stability scores, TER history and risk metrics updated daily.