While regular investors will still be able to drip feed capital into the Aberdeen fund, the firm wrote to intermediaries last week asking for their cooperation so it could avoid having to hard close the fund. So for large new allocations to the region Aberdeen’s offering is a fund that can only be looked upon with thoughts of what could have been. But there are other big players out there, and here we profile four of them.
First State GEM Leaders
Currently the First State GEM Leaders Fund is still fully open and it will remain the top alternative to Aberdeen’s Emerging Markets Fund until isn’t any longer (unless its performance goes severely awry). Managed by Jonathan Asante and Glen Finegan from Angus Tulloch’s newly-renamed First State Stewart team, the fund is £2.1bn as at 31 January and has 59 holdings.
Over one, three and five years and since inception it is ranked first quartile and it has beaten the benchmark over all of these time periods too. The fund was launched to give investors access to First State’s expertise in the region after its previous GEM offering was soft closed eight years ago. The key difference between the two funds is that while the GEM Leaders Fund uses the same stock selection process, it does not invest in smaller companies.
Franklin Templeton EM Investment Trust
The Templeton Emerging Markets Investment Trust was launched in 1989 and is a flagship fund in the arena, it’s comparatively young unit trust offering has also been around since 2004. The latest fund factsheet places the IT at £1.9bn and the Oeic at £19.34m, and this is no accident. While the investment trust has beaten the index impressively over three, five and 10 years and since inception, the Oeic has underperformed the benchmark significantly over one, three and five years.
But some fund pickers have raised their doubts about using an investment trust in emerging markets, preferring to use a more liquid structure since clients often want to get in and out of the region quickly. For a long-term holding, there can be few that have outperformed the maestro Mark Mobius’ closed-end fund though, since inception he has returned 1956%, not to be sniffed at!
IM Hexam GEM Fund
As mentioned in a previous analysis on the Aberdeen EM Fund’s soft closure, the IM Hexam GEM fund is managed in a very different fashion to core EM holdings like the Aberdeen or First State funds. For this reason, it tends to be a lot more volatile, with manager Bryan Collings a high-conviction manager who does not pay much heed to the benchmark. The fund only launched in February 2009 and so has a limited performance history. But so far this year Collings high alpha-generating approach has him ranked in the top three per cent of the IMA GEM Sector.
This fund certainly shouldn’t be viewed as a replacement for the Aberdeen EM Fund in portfolios and is better suited as a satellite holding within the EM portion of a portfolio.The fund has a large 16.9% overweight in Brazil, which makes up 32% of the portfolio, with China accounting for 20%. It also holds more in Russia than many of its peers, with 9% of the fund allocated to the country (as at 31 January).
M&G GEM Fund
Another relative newcomer to the sector that is worth consideration is the M&G Global Emerging Markets Fund, also launched in February 2009. The managers of this fund, Michael Godfrey and Matthew Vaight use a bottom-up basis to identify around 60 companies that improve their returns on capital or have the ability to sustain high returns for a long period of time. They can invest across all countries, industries and market caps and take a long-term approach, with a typical holding period of three to five years.
Since launch it has returned 103.4%, compared to 88.7% from the benchmark, although in the year to 31 December, like most GEM funds it posted negative returns (-18.74%). The fund is currently £550m in size and the team said they think they would be comfortable managing five or six times that amount.
What are your top picks in EM outside Aberdeen? Do any of these funds feature, or do you rate somebody else entirely? Let us know below…
