Speculation had begun to mount that following the move Aberdeen took to soft close its £3bn Emerging Markets Fund, and given First State’s history of taking similar steps with its other funds in the region, the GEM Leaders Fund would be next.
Darius McDermott, managing director of Chelsea Financial Services, is one commetator who voiced his concerns: “My real worry for investors is that First State have also closed some of their EM franchise funds and, if their Leaders fund should also be closed in the future, the remaining funds that are open to new investment in the sector are nowhere near as good right now.”
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But a spokesperson for the asset manager said there were currently no plans to soft close the flagship fund, or its other Leaders fund focused on APac, since neither invests in smaller companies.
In January First State used soft closure to "dissuade clients from investing new money" into a number of its GEM/APac funds by making the initial charge compulsory.
Soft-closure track record
The vehicles affected were the APac Sustainability, GEM Sustainability, Greater China Growth, Indian Subcontinent and Latin America funds, meaning new investors have to pay an initial charge of 4% on these vehicles.
At the time Gary Withers, regional managing director for EMEA at First State, said: "Having monitored the situation carefully, we believe we are nearing the point beyond which capacity issues could start affecting performance of these funds and, more specifically, restrict their ability to invest in smaller companies."
This followed a move eight years previously to soft close the First State Asia Pacific and First State Global Emerging Markets funds.
But despite the fact the GEM Leaders and APac Leaders funds have grown to £2.2bn and £5.6bn respectively (as at 31 January), First State said their mid- to large-cap focus meant they were still a considerable way off reaching capacity.
"The Aberdeen Emerging Markets Fund invests in smaller companies; we also soft closed those strategies that invest in smaller companies. Capacity problems appear if the market is at the stage where you struggle to find the type of good quality companies you want to invest in.
"The original GEM and APac funds were and still do invest in smaller companies. The Leaders funds are run along similar lines in terms of investment process but without the smaller companies. Those two funds remain open through existing platform arrangements and I am not aware of any imminent plans to make it otherwise," the spokesperson concluded.
