The global sell-off last month that was quickly dubbed ‘Black Monday’ divided investors in terms of whether it presented a buying opportunity or a reason to be bearish.
Fidelity global chief investment officer Dominic Rossi warned that the best thing investors could do during the volatile period was nothing at all, as we are still in a low nominal growth environment and price pressures could continue to push downwards.
“The old adage of catching a falling knife is apt here,” he said. “I can’t tell you how many times I’ve been through one of these. Early on in my career I tried to catch the falling knife and learned that’s probably not the way to go.” “The best thing to do at the moment is to do nothing and to just let the volatility subside as it will do. Anything you try and do now will almost certainly be wrong. My suggestion to investors is to do very, very little.” 
Rathbones’ David Coombs (pictured), however, used the dip to add to his developed market exposure through Japan and boosted positions in China, wider Asia and emerging markets in his Strategic Growth portfolio.
“We look back at taper tantrums or Lehmans or the dotcom bubble or Greek debt drama and there’s usually some kind of underlying crisis that creates this sort of panic,” Coombs told FE Trustnet last week.
“The fact is that [the sell-off] happened in August and volumes were relatively low, and I think high frequency traders have had a bigger impact on the market than maybe they do at other times.”
“I don’t understand why the fact that China is slowing is creating this effect. Everyone knew China was slowing. Most big corrections are due to a shock and I don’t know what the shock is here.”
As such, here are three funds and trusts that he increased his weightings in over the last month.
“I’ve been adding to my Asia exposure through Ezra Sun’s Veritas Asian fund,” Coombs said.
“I’ve been invested in Ezra for decades and I think he’s a very experienced manager, I like his investment style. Yes, he has periods of underperformance – who doesn’t – but over the long term, he’s provided outperformance for me.”
FE Alpha Manager Sun has managed the five FE Crown-rated fund since its launch in 2004. Over that period, it has provided a total return of 283.3 per cent, outperforming its peer average in the IA Asia Pacific ex Japan sector by 108.27 percentage points and its MSCI AC Asia Pacific ex Japan benchmark by 107.85 percentage points.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
While the fund managed to weather the storm of 2008 by delivering a top-decile return, it struggled during the relative bull market of 2010, which would suggest the investment vehicle is more of a defensive play than an aggressive provider of returns during market upswings.
Nevertheless, it has still found itself in the top decile for its performance over one, three, five and 10 years, as well as over one and six months.
The $543m fund has also achieved a top-quartile Sharpe ratio and annualised volatility over one, three, five and 10 years.
Veritas Asian has a total expense ratio of 1.22 per cent as it charges a performance fee.
Coombs says the US and Japan are his two favourite markets at the moment and has increased his exposure to Japan through a variety of funds and trusts.
“Japan clearly sold off because it’s in the Asian region and is a beneficiary of Chinese growth. But when you invest in Japan you’re not just investing in companies that are exposed to China, you’re investing in global companies in many cases, so I felt it was a good opportunity to use this noise to add to my overweightings to Japan,” the manager explained.
One such fund is JPM Japan, which has been co-managed by Naohiro Ozawa, Nicholas Weindling and Shoichi Mizusawa since 2012.
The three FE Crown-rated fund looks for quality Japanese companies that are offering above-average growth per share and whose share prices are also at attractive valuations.
Over its managers’ time at the helm, the fund has returned 55.35 per cent, outperforming its sector average and benchmark by 14.37 and 11.64 percentage point respectively.
Performance of fund vs sector and benchmark over manager tenure
Source: FE Analytics
The fund had a turbulent year in 2012 when it lost 7.59 per cent compared to its average peer’s gain of 3.49 per cent, but the new managers were appointed towards the end of the period and were able to produce a gain over the next few months.
However, the fund has found itself in the bottom decile for its annualised volatility over the manager’s tenure, although it has delivered a top-quartile Sharpe ratio and alpha, which measures performance in excess of its benchmark, over the same time period.
JPM Japan has a clean OCF of 0.93 per cent.
“I added a little bit to this – it’s the only emerging markets fund I hold. Although I have added to emerging markets, my weighting overall is still at only 1.5 per cent,” Coombs said.
Increasing exposure to this two FE Crown-rated trust was seen as a value spot to the manager – currently, it is trading on a discount of 11.1 per cent and isn’t geared, which means the trust will experience smaller losses if the market dips again.
The £587m trust has been headed up by Andrew Elder for more than a decade, and has certainly had a turbulent time over his tenure.
During the financial crash of 2008 the trust struggled, falling to the bottom decile. It also fell to the third quartile during the sell-off of 2011 and the taper tantrum in 2013, but performs strongly during bull markets and was in the top quartile in 2006, 2009 and 2012.
As such, it will be no surprise that the trust has found itself in the bottom quartile again this year following the Asia sell-off. This volatility means that the fund has underperformed its sector average over management tenure by 14.63 percentage points, returning just 1.52 per cent.
Performance of fund vs sector and benchmark over management tenure
Source: FE Analytics
However, it’s important to note that there are only 10 funds in the IT Global Emerging Markets Equities sector.
Genesis Emerging Markets has an ongoing charge of 1.67 per cent.