Most consistent funds of the decade: Emerging markets
Only one fund from the sector was a top-quartile performer in the five years before and after September 2007 – and it is run by neither First State or Aberdeen.
Lazard Emerging Markets is the only fund in the IMA Global Emerging Markets sector that can boast top-quartile performance in the five years before and after September 2007, according to recent FE Trustnet
Emerging markets funds have had a tough time of late, lagging in both the performance and popularity league tables.
Many investors have flocked to the safety of global funds with greater developed market exposure, to help protect them from growing levels of volatility.
However, the five crown-rated Lazard Emerging Markets fund has shown consistent returns over the last decade, and may be of interest to those looking to increase their risk exposure in light of recent developments in the US and Europe.
Performance of fund vs sector over 5-yr periods
Source: FE Analytics
|Lazard Emerging Markets
|IMA Global Emerging Markets
While Lazard Emerging Markets did not top its sector in either the five years before or after September 2007, finishing fourth and sixth respectively in the two periods, it is the only fund to finish in the top quartile both times.
According to FE Analytics
, between 27 September 2002 and 27 September 2007 the fund returned 293.94 per cent, compared with 275.47 per cent from its sector average. In the next five-year period, the fund returned 38.05 per cent, beating the average portfolio in its sector by 22.5 percentage points.
Although Aberdeen Emerging Markets
, arguably the most popular fund with retail investors in the sector, has outperformed Lazard Emerging Markets over the 10 years, it failed to make it into the top quartile in the first five-year period.
Performance of funds and sector over 10-yrs
Source: FE Analytics
Over 10 years, Lazard Emerging Markets has returned 439.61 per cent and Aberdeen Emerging Markets has returned 537.86 per cent. Both have eclipsed their IMA Global Emerging Markets sector average, which returned 330.77 per cent in the period.
Bestinvest’s Jason Hollands says that Lazard’s consistency is impressive, particularly given the greater popularity of Aberdeen Emerging Markets.
However, he points out that most emerging markets managers do not pay too much attention to sector rankings.
"Investors need to bear in mind that a lot of funds in these indices build portfolios through a stock-by-stock basis and not a top-down approach, unlike UK equity portfolios which have a higher sector correlation to the indices," he explained.
"Therefore there is more room for deviation through the quartiles as funds just pick companies they like and are not too concerned with their positioning versus the sector average."
Hollands highlights First State Global Emerging Markets
as a fund that does not follow the trends of it competitors.
"First State is very underweight China at the moment and has no exposure to Russia," he said.
Lazard Emerging Markets is institutionally focused and carries a minimum investment of £100,000 for anyone investing directly, but this figure is significantly lower for anyone who uses a platform such as Hargreaves Lansdown, which demands a minimum investment of £2,000.
The fund is headed up by FE Alpha Manager James Donald
, who has been manager since its launch in May 1997. He also runs the Lazard Global Active Emerging Market Equity fund.
His £454.3m portfolio has a high exposure to the Asia Pacific, with 43.30 per cent of its total assets invested in the sector.
China Construction Bank, Taiwan Semiconductor Manufacturing, Samsung Electronics and Telekomunikasi Indonesia are all top-10 holdings.
Donald is also overweight Brazil and has an unusually high position in Africa, which accounts for 14 per cent of assets under management.
According to FE data, the fund is overweight in financials and telecoms, media and technology compared with its IMA Global Emerging Markets sector.
Although it is a growth-focused portfolio, these sectors tend to contain companies that pay a dividend. The fund’s 2.1 per cent yield is among the highest in the sector.
Its institutional share class carries a total expense ratio (TER) of 1.1 per cent, but for people investing through Hargreaves Lansdown, this rises to 1.61 per cent.