Following the exit or ‘stepping aside’ of a long term manager from a fund, investors often question whether to sell out or wait to understand to what extent the investment strategy will change.
The £8bn Stewart Investors (formerly First State) Asia Pacific Leaders and the £2.5bn Stewart Investors Global Emerging Markets Leaders funds have been two of the most well-known and revered ways to play the respective Asia Pacific and emerging markets spaces over the past decade or so.
However with the news that Angus Tulloch, David Gait and Jonathan Asante will be moving over from the duties on their portfolios investors may wish to consider alternatives.
In an article this morning, the overall message from market commentators was that investors shouldn’t panic. Here, with the help of the experts, though, we look at possible alternatives to the Stewart funds in both the Asia-Pacific and global emerging markets spaces for those investors who are considering a change of style.
First up is this $775m fund which sits in the IA Asia Pacific ex Japan sector. Darius McDermott, managing director of Chelsea Financial Services says it is a close fit of the Stewart Investors Asia Pacific Leaders fund.
“It has a very similar type of strategy and good coverage and, after mapping the performance of the fund over the last few years, you can see they are very similar on both the upside and the downside capture,” McDermott said.
Managed by Sharat Shroff, it has been available to UK investors since 2011, although the quality-biased strategy goes back to 1994.
The Luxembourg-domiciled fund has tripled in size over the past year or so reflecting Matthews Asia increasing popularity in the UK market, being relatively unknown before despite a strong presence in the US.
According to FE Analytics, it is has returned 35.6 per cent since February 2011. By comparison the IA Asia Pacific ex Japan sector average over this period is 18.01 per cent while the MSCI Asia Pacific ex Japan index gained 13.89 per cent.
Performance of fund, sector and index since launch
Source: FE Analytics
Not only has it been top decile in terms of total returns over this period but it has also been considerably less volatile than both the sector and index and is top decile risk adjusted terms using the, as measured by its Sortino and Sharpe ratios.
The fund has a clean ongoing charges figure [OCF] of 2 per cent.
Somerset Emerging Markets Dividend Growth
Next up McDermott says this £931m portfolio, which has been run by FE Alpha Manager Edward Lam since its launch in 2010, is a great way to play emerging markets.
“While it is does say dividend in its title it’s not really a high income type of fund and much more of an income and growth strategy,” McDermott said.
The fund has been the sector’s third best performer since its launch in March 2010 with returns of 23.4 per cent. Its MSCI Emerging Markets benchmark has lost 2.85 per cent over that time while the average fund in the sector lost 3.93 per cent.
Performance of fund vs sector and index since Mar 2010
Source: FE Analytics
It has also outperformed both the sector and its benchmark in each full calendar year since launch and is also ahead so far this year.
Lam’s cautious outlook and focus on quality companies has led him to hold more 10 per cent in cash over recent years and, currently, it makes up 12.85 per cent of his portfolio.
The fund clean OCF of 1.3 per cent and a current yield of 2.2 per cent.
Henderson Global Emerging Markets Opportunities
Simon Evan-Cook (pictured) says for those considering selling Asante’s fund, he thinks this nimble fund is the best fit despite it having a track record of less than one year.
“Henderson Global Emerging Markets Opportunities is an obvious first stop. Its run by Glen Finegan who is a former member of the First State Stewart team, and he still operates the same style,” he said.
Finegan took over the fund in February 2015, a bad time for emerging markets and very short period in which to judge his performance. While the index has lost 9.84 per cent over this time, the fund is down 9 per cent and the sector 10.62 per cent.
Performance of fund vs sector and index under Finegan
Source: FE Analytics
At £134m the fund is a minnow compared to the amounts Finegan was used to investing First State [now Stewart Investors], but still opts for mostly quality names with Unilever, the giant consumer goods company, his current largest bet.
The fund clean OCF of 0.91 per cent.
Schroder Asian Alpha Plus
Equilibrium’s Mike Deverell backs this £523m fund, managed by Matthew Dobbs since 2007 as good way to take advantage of low valuations in Asia Pacific ex Japan equity markets.
“We do still quite like Asia as although it is exposed to the slowdown in China it is relatively cheap, earnings look quite robust and the commodity slowdown is a net benefit for most of the countries in the region,” he said.
“We like the Schroder Asian Alpha Plus run by Matthew Dobbs – he has a great long term record with Schroders and this is very much a concentrated, best ideas fund.”
“They also don’t stick rigidly to a benchmark which we think is very important especially at the moment. As a result he’s done well out of holding India, for example.”
Dobbs has made a top decile 26.2 per cent over five years but more recent performance has been lower with the fund second quartile over three and five years. However, he has a good track record of beating his benchmark.
The fund’s clean OCF is 0.96 per cent.
Deverell is more sceptical on emerging markets at present but says he would opt for this more unusual offering when/if he buys back in.
It is also less well known in the UK but the Norway based portfolio is a hefty £2.9bn in size and although it very much focused on emerging markets it actually sits in the IA Global sector, as the managers can hold up to 50 per cent of the portfolio in developed market-listed companies which derive their earnings from developing world.
However, this tranche of the portfolio has never been more than 20 per cent of Skagen KonTiki’s total assets.
The portfolio, which is value-orientated, has comfortably outperformed since its launch in 2002 and has clocked up 136.55 per cent over the past decade, beating the index by 40 percentage points.
Performance of fund and index over 10yrs
Source: FE Analytics
Despite beating its benchmark in each year between its launch and 2011, its recent performance has been mixed with the portfolio falling harder than the index over three and one year time periods.
Deverell added: “The only issue with this fund is that it is difficult to purchase on platforms due to the settlement criteria of the fund.”
The fund has a total expense ratio of 1.11 per cent.