Stewart Investors Global Emerging Markets (18.6%), GEM Leaders (23%) and GEM Sustainability (24.1%) funds have all held up well over three years, though these all have a healthy weighting to developed market stocks, and so sit in the IA Specialist sector.
“Aberdeen have been so dominant in emerging markets, even compared to First State Stewart, so effectively they are almost struggling to be selective in ownership,” said Adrian Lowcock, head of investing at Axa Wealth.
“They owned all the companies that they thought were good and not be so selective, which I think has impacted on performance. Size ultimately impacts on your ability to stick with your best choices.”
Gavin Haynes, managing director at Whitechurch Securities, adopts a barbell approach in Asia, using Stewart funds alongside Jonathan Pines’ Hermes Asia ex Japan Equity fund.
He says: “Pines takes more of a value approach, so he’s investing in Korea at present. Stewart Investors probably wouldn’t buy Korea, because of the corporate governance there, whereas Pines is a valuation-led manager, and he thought valuations have just become too cheap there.
“These funds do tend to work well at different stages in the cycle, but if you blend them together it tends to work.”
Ultimately, Lowcock believes First State Stewart and Aberdeen should be defensive in downwards markets, but they haven’t necessarily provided that defensive element as well in recent years.
“10 years ago, Aberdeen and First State were the only real players that could get emerging markets right, taking a defensive capital preservation approach as a primary focus,” he says.
“But since then, corporate governance has improved in Asia and emerging markets and there has been a better understanding by fund manager groups in doing more due diligence and research and not just chasing growth.”
