An alternative to First State Global Emerging Market Leaders
Rob Gleeson, head of research at FE, picks a replacement for Jonathan Asante’s FE five crown-rated fund, which some feel may follow its Asia Pacific counterpart into soft-closure.
By Joshua Ausden, News Editor, FE Trustnet
Monday August 13, 2012
Last week’s announcement that First State is actively slowing inflows into its Asia Pacific Leaders fund came as a big blow to advisers.
It is the second flagship emerging-market fund that has hinted at soft-closure in a matter of months – the first being the £3.3bn Aberdeen Emerging Markets portfolio.
Rob Gleeson, head of research at FE, believes the £2.8bn First State Global Emerging Market Leaders
fund – which is among the best sellers in the entire IMA universe over six months, with £400m worth of inflows – could soon suffer the same fate.
While Gleeson rates a number of more focused emerging market options, including Jupiter Emerging European Opportunities
and Robin Geffen’s Neptune Russia & Greater Russia
, his preferred choice in the IMA Global Emerging Market sector is FE Alpha Manager James Donald’s
Lazard Emerging Markets fund.
The £460m portfolio, which is available with a minimum investment of £2,000, has failed to match the returns of Aberdeen Emerging Markets and First State Global Emerging Markets over the last decade, but it is consistently a top-five performer and has taken on less volatility than the average portfolio in its sector.
Performance of fund vs sector and benchmark over 10-yrs
Source: FE Analytics
According to FE data, it has returned 367.73 per cent over 10 years, outperforming its MSCI Emerging Markets benchmark and sector average by 51.82 and 77.63 per cent respectively. It has also outperformed both over one, three and five years.
Performance of funds vs sector and benchmark
Source: FE Analytics
||1-yr returns (%)
||3-yr returns (%)
||5-yr returns (%)
||10-yr returns (%)
|Aberdeen Emerging Markets
|Lazard Emerging Markets
|MSCI Emerging Markets
|UT Global Emerging Markets
|First State Global Emerging Markets Leaders
"It’s smaller and therefore more nimble than the likes Aberdeen and First State’s offerings, which means it can take bigger positions in companies down the market cap," said Gleeson.
Brazilian multi-brand acquirer Redecard is currently one of the portfolio's biggest holdings. Its largest position is in emerging Asia, accounting for 42.6 per cent of assets under management (AUM).
It is currently overweight Brazil and has a higher-than-average position in Africa, with a 14.5 per cent weighting. South African-listed Shoprite is another top-10 holding.
In a recent note to investors, Donald said he remained bullish on emerging market equities in the short-, medium- and long-term.
"Although we find downside risks related to the global economy to be material, we believe the upside opportunities are significantly greater," he stated.
The fund has five FE crowns, a yield of 2.38 per cent and a total expense ratio (TER) of 1.61 per cent.
Donald has headed up the portfolio since its launch in 1997.