View the article online at http://citywire.co.uk/money/article/a564624
Most top performing emerging market funds closed to investors
We look at what's left after seven portfolios have been soft closed since September.
Emerging markets had their best run since 2001 last month, with equities adding 11.4% and outperforming the rest of the world.
But the stream of money into emerging markets so far this year – which comes after massive outflows in the second half of 2011 – has hit a tipping point for some investment groups and seven funds in the sector have been forced to soft close since September.
Aberdeen Asset Management has been the latest to reduce access to its popular Emerging Markets fund and its offshore Global Emerging Markets Equity fund as it reported flows in and out of the funds could lead to liquidity problems.
The move comes as investors continued to pour money in despite Aberdeen’s measures to reduce investment by 'soft closing' access to new clients in 2009, introducing a cap on existing segregated accounts and pulling advertising.
Darius McDermott, managing director at Chelsea Financial Services, said: ‘We support their actions as they are looking after their existing investors. However we are obviously disappointed that new investors won't be able to invest in this fund, particularly as there is a lack of competition for decent alternatives in the sector.’
An analysis of the top performing funds in the sector shows that Aberdeen isn’t alone. The fund is the latest of a number of emerging market funds to close the door to new investors after First State soft closed five emerging markets funds last September whilst Lazard and Baillie Gifford have also soft-closed their top performing emerging market funds.
As the emerging market growth story continues, we look at the best performing funds over the past five years that you can still invest in.
Soft closures hit emerging market funds
Eight funds beat the MSCI Emerging Markets total return benchmark of 43.9% in the past five years and of those only three are open for investment; First State Global Emerging Markets Leaders ; Dimensional Emerging Markets Core and Marlborough Emerging Markets Trust .
Top 10 emerging market funds
|Ranking||Fund name||Total return over five years|
|1||First State Global Emerging Markets Leaders||88.1%|
|2||Aberdeen Global - Emerging Markets Equity||88.0%|
|3||Aberdeen Emerging Markets||86.4%|
|4||First State Global Emerging Markets||82.6%|
|5||Dimensional Emerging Markets Core||57.2%|
|6||Lazard Emerging Markets||48.5%|
|7||Baillie Gifford Emerging Markets Growth||46.2%|
|8||Marlborough Emerging Markets Trust||44.2%|
|9||Baring Emerging Markets||43.3%|
|10||AXA Framlington Emerging Markets||42.2%|
The top performing emerging market fund over the past five years is First State’s Global Emerging Markets Leaders fund, which is overseen by Citywire A-rated manager Jonathan Asante.
It has given returns of 88% in that time and is focused on large companies primarily in Asia like Hong Kong & China Gas and Tiger Brands.
The fund is a Citywire Selection Star Pick and has grown to £1.9 billion but shows no sign of slowing. Sergei Cristo, spokesman for First State says: ‘The difference is that the fund doesn’t invest in smaller companies. It’s the smaller company element which makes it difficult in certain markets to carry on investing and find good quality companies.’
In second and third place are Aberdeen’s two soft-closed funds, Aberdeen Global-Emerging Markets Equity and its Emerging Markets fund.
Both funds are run by Citywire A-rated manager Devan Kaloo and have beaten the benchmark to give returns of 88% and 86% over the past five years.
Other funds that beat the benchmark over the past five years but have been soft-closed include First State's Global Emerging Markets fund also managed by Jonathan Asante, the Lazard Emerging Markets fund overseen by James Donald and Baillie Gifford’s Emerging Markets Growth fund run by Richard Sneller.
In fifth place and still open for investment is Dimensional’s Emerging Markets Core Equity fund with returns of 57.2% since 2007. The fund has major holdings in big companies like Samsung and Gazprom, the Russian state-controlled energy giant.
Marlborough Emerging Markets Trust just beat the benchmark to give returns of 44.2% over the past five years. The fund is run by James Smith and has top holdings in financials and energy companies, with a focus on Asia.
Smith also uses ETFs to track the index returns of markets that are more difficult to access. The fund’s top holding is in Credit Suisse’s ETF, tracking the MSCI Russia index and Deutsche Bank’s MSCI Korea ETF is also among the fund’s top holdings.
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Look up the funds
- First State Global Emerging Markets Leaders A GBP
- Aberdeen Global - Emerging Markets Equity A2 Acc
- Aberdeen Emerging Markets A Acc
- First State Global Emerging Markets A GBP Acc
- Dimensional Emerging Markets Core Eq Acc
- Lazard Emerging Markets Ret Inc
- Baillie Gifford Emerging Markets Growth A Acc
- Marlborough Emerging Markets Trust
- Baring Emerging Markets I
- AXA Framlington Emerging Markets Acc
Look up the fund managers
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by Gavin Lumsden on Sep 30, 2016 at 17:23