Investors will have to act quickly if they want exposure to some of the best-performing funds of recent years, according to FE’s head of research Rob Gleeson (pictured)
, who highlights five that could be on the verge of closing to new money.
Gleeson says the difficult macro conditions have pushed the majority of investment inflows into just a handful of tried-and-tested portfolios – many of which are now reaching capacity.
Aberdeen Emerging Markets
"This fund is already said to be soft-closed because Aberdeen is no longer marketing it, but the initial charge hasn’t gone up yet and it’s still available for a minimum investment of £1,000," said Gleeson.
"Aberdeen runs a fairly concentrated portfolio of just 70 stocks it believes in from across Europe, Asia and Latin America. Above a certain level of assets it would have to increase the number of holdings, which might lower the overall conviction in the portfolio."
The £3.4bn fund, run by Devan Kaloo’s London-based emerging markets team, is one of the best-performing portfolios of its kind in recent years.
With returns of 506.12 per cent it is the best-performing Global Emerging Markets fund of the last decade and the portfolio is in the top-four in its sector over three and five years as well.
Performance of fund vs sector and benchmark
Source: FE Analytics
||1-yr returns (%)
||3-yr returns (%)
||5-yr returns (%)
||10-yr returns (%)
|Aberdeen - Emerging Markets
|MSCI EM (Emerging Markets)
|IMA Global Emerging Markets
As well as topping the total return charts, Aberdeen Emerging Markets is also one of the least volatile funds of its kind, protecting effectively against the downside in both 2008 and 2011.
Kaloo and his team are currently overweight Brazil and India and underweight China. In terms of sector, financials make up the biggest chunk of the portfolio [33.9 per cent].
The five crown-rated fund has a total expense ratio (TER) of 1.93 per cent.
"Troy is a small firm and doesn’t have the staff to handle an expanding number of clients," said Gleeson. "It’s clear they would rather stop taking money than have their managers distracted from what they do best."
"The Trojan fund soft-closed at £1bn, and I wouldn’t be surprised if the same happens in the case of Trojan Income."
FE Alpha Manager Francis Brooke’s
£772m portfolio is a top-decile performer over three and five years, with returns of 44.8 and 38.33 per cent respectively. It is also one of the least volatile over both periods.
Performance of fund, sector and index over 5-yrs
Source: FE Analytics
The fund has been cautiously positioned for some time, favouring defensive FTSE 100 companies that have the ability to grow their dividend.
Brooke remains cautious of various macro risks, but has recently upped his exposure
to higher-Beta plays in the property and oil and gas sectors.
The fund has a TER of 1.06 per cent and is currently yielding 4.34 per cent.
M&G Corporate Bond
"This very popular option is already exploring ways to slow inflows, though it’s still open at the moment," Gleeson continued.
"There is much less liquidity on the corporate bond market than on the equity markets and while the size of M&G’s bond team prevents the fund becoming unwieldy, it is becoming ever harder to find investment opportunities of a suitable size, even on the primary market."
FE Alpha Manager Richard Woolnough’s £6.6bn portfolio is one of the largest in the entire IMA unit trust and OEIC universe.
According to FE data, it has returned 50.35 per cent over five years – a figure only beaten in its sector by M&G Strategic Corporate Bond. The fund is also a top-quartile performer over three years, but its focus on investment grade securities has held it back more recently.
M&G Corporate Bond has a minimum investment of £500 and a TER of 1.16 per cent.
JOHCM UK Equity Income
"Part of what has made this fund successful has been its flexibility to look at small- and mid-size stocks for good income opportunities," Gleeson explained.
"The amount that can be invested in these types of companies is limited and the larger a fund gets, the more it has to look to larger companies that offer the required liquidity."
"The managers are keen not to lose their differentiating factor and morph into another large cap income fund. While they’ve already passed the £1bn capacity level they outlined in their fund literature, I think they will act as soon as they think their style is compromised."
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The £1.2bn portfolio, managed by James Lowen and Clive Beagles, has returned 99.8 per cent since its launch in November 2004, compared with 73.3 per cent from its All Share benchmark, and 59.32 per cent from its sector average.
The fund’s bias to mid and small caps has resulted in above-average volatility, however.
It has a TER of 1.28 per cent and is available for a minimum investment of £1,000.
First State Asia Pacific Leaders
Like M&G Corporate Bond, Angus Tulloch’s First State Asia Pacific Leaders fund has also been slowing inflows due to worries over capacity.
Gleeson worries that soon it could be difficult for the everyday retail investor to get access to the five crown-rated portfolio.
"The fund is reaching the limit of the amount of admin it can deal with," he said. "Its popularity means it has thousands of small investors, which requires a lot of overheads to service."
The £6bn portfolio has outperformed its IMA Asia Pacific ex Japan sector average and MSCI AC Asia Pacific ex Japan benchmark over one, three and five years, with less volatility.
It currently has a minimum investment of £1,000 and a TER of 1.55 per cent.