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Most top performing emerging market funds closed to investors

We look at what's left after seven portfolios have been soft closed since September.

 
Most top performing emerging market funds closed to investors

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.

15 comments so far. Why not have your say?

RICHARD AUSTIN

Feb 08, 2012 at 13:02

i'M NO EXPERT BUT i HAVE SEEN MY INVESTMENT TRUST HOLDING IN TEMPLETON EMERGING MARKETS INVESTMENT TRUST, RISE FROM 321 TO 600.

AS AN IT. IT'S CERTAINLY NOT "CLOSED"

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Jonathan Crowther

Feb 08, 2012 at 13:16

Why are Investment Trusts ignored?

Surely the above results should be compared with Investment Trust returns in the global emerging market sector from Templeton, JPM, Genesis and Utilico over 5 years. From a little research it seems to me the comparable results are 102%, 53%, 48% and 43%.

Am I missing something?

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tom arlidge

Feb 08, 2012 at 13:42

Answers on a postcard....seems obvious to me these newsletters are the new advertising media and in between the lines there is always an underlying sell /influencing process going on, why say more,

IT's are simply the best...

Some ETF's (the less exotic ones, come a close second.

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John Shepherd

Feb 08, 2012 at 14:18

Personally, I would go for a EM Tracker fund (eg Blackrock or Legal and General) and pound cost average into the market. The increased volatility of this type of fund may well work to your advantage into the future and take individual manager performance out of the equation.

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Anthony O' Grady

Feb 08, 2012 at 14:48

Advisors don't like Investment Trusts because they don't earn the commission they can earn from selling OEIC's. I agree with the above comments regarding IT's, and own some myself (though in my case not emerging mkts). The only note of caution is that in a rapidly falling market IT's tend to fare worse, though this is only a note of caution, not an argument for not owning them.

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Muggle

Feb 09, 2012 at 09:55

can anyone recommend a decent website for analyzing the performance of ITs ?

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Marketwatcher

Feb 09, 2012 at 09:58

Muggle, try www.trustnet.com.

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Anthony O' Grady

Feb 09, 2012 at 14:39

Or Morningstar

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david rogers

Feb 10, 2012 at 06:34

the Citywire one is pretty good too. So is Bestinvest although you would scarcely know it existed from the company,s mailing etc. I wonder why?!!!

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david rogers

Feb 10, 2012 at 06:38

Oh and of course the industry`s own website Association of Investment Companies

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Chops

Feb 10, 2012 at 10:38

I am a Fund Manager myself, but in the private equity asset class. It might be due to this that I still prefer OEICs / mutual funds over ITs. I would prefer to invest in a fund that trades at the value of the underlying holdings than in a listed IT that trades up and down on the whims of stock market investors. To me an IT just adds another layer of risk and takes you one step further away from the underlying assets (it is share trading on share trading). Firms like Hargreaves Lansdowne make it so cheap to buy and sell OEICs that I really don't think you save that much more in fees by using ITs, and by using an ISA and your CGT allowance if you're wealthy enough to invest more than your £10k in the ISA then you avoid incurring tax as well.

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Scholesy

Feb 11, 2012 at 11:11

I've only been investing for 2 or 3 years through Fidelity into Funds. I'm intrigued by ITs. I don't think Fidelity offer them through their platform - Is this because theres no profit for them in it? Could I invest in ITs through an alternative provider whilst having the Fidelity ISA in the same tax year? My perception is you can only have one per year. I don;t think I could consolidate it through Fidelity even if I could. Can anyone clarify?

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x123

Feb 13, 2012 at 20:31

i like its and so many allow you entrance at a discount to nav. surely before too long the investors will begin to realise their worth at least as another play in ones investment portfolio.

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david rogers

Feb 14, 2012 at 00:36

@Scholesy. Well you can certainly buy Fidelity`s own ITs within their ISA platform Including the famous (or should it be infamous) Anthony Bolton Special Situations China IT. What I believe you dont have on their platform is the ability to buy any UK share (excluding AIM) including any IT . Bestinvest platform does offer you that possibility although they certainly keep pretty quiet about anything except funds. Look at using Alliance Trust Savings for the flexibility of funds plus ITs and the ability to switch at any time at a reasonable cost. I think there are a couple of alternatives which are even a very small amount cheaper.

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mikewat

Oct 30, 2012 at 18:08

I am new to investments and started out in April 2011 with an isa with Aberdeen emerging markets. Up untill now my investment has risen by 1.94%. This seems a very poor return over 20 months. Am i being to impatient.

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  • First State Global Emerging Markets Leaders A GBP
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  • Aberdeen Global - Emerging Markets Equity A2 Acc
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  • Aberdeen Emerging Markets A Acc
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  • First State Global Emerging Markets A GBP Acc
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  • Dimensional Emerging Markets Core Eq Acc
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  • Lazard Emerging Markets Ret Inc
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  • Baillie Gifford Emerging Markets Growth A Acc
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  • Marlborough Emerging Markets Trust
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  • Baring Emerging Markets I
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  • AXA Framlington Emerging Markets Acc
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  • Devan Kaloo
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  • Jonathan Asante
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  • James Donald
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  • Richard Sneller
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  • James Smith
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