Trusts to fill emerging market void
First State and Aberdeen are the undisputed heavyweights in the sector, but before long investors may have to look to the closed-ended universe to gain exposure to them.
By Joshua Ausden, News Editor, FE Trustnet
Thursday June 14, 2012
The recent soft-closure of Aberdeen Emerging Markets
and Aberdeen Global Emerging Market Equity has left investors with few established options in the open-ended universe.
First State Asia Pacific
, Global Emerging Markets
and Greater China Growth
have already closed to new money, and continued inflows into First State Asia Pacific Leaders
and First State Global Emerging Market Leaders
could see these five crown-rated products follow suit.
Simon Elliott, investment trust analyst at Winterflood Securities, says investors may have to look at portfolios in the closed-ended universe to maintain their exposure to Aberdeen and First State’s stable of highly rated managers.
"Unlike some, I don’t think there is going to be a surge of money coming into investment trusts following RDR, but the soft-closure of Aberdeen Emerging Markets certainly won’t do any harm to the popularity of emerging market trusts," he commented.
"You’ve got some extremely strong options available; notably the Scottish Oriental Smaller Companies trust, which Angus Tulloch is beginning to take control of following the announcement of Susie Rippingall’s retirement, as well as the Aberdeen trusts, which have an excellent reputation, and Templeton Emerging Markets."
Dr Mark Mobius’ Templeton Emerging Markets portfolio is perhaps the most obvious alternative to Aberdeen Emerging Markets; according to FE data, it has returned 386.5 per cent in the last decade, compared with 206.3 per cent from its MSCI Emerging Markets benchmark.
It also managed to outperform Aberdeen Emerging Markets over this period, albeit with more volatility.
Performance of funds vs index over 10-yrs
Source: FE Analytics
However, the Aberdeen portfolio has a better record over three and five years.
Mobius' £2.02bn five crown-rated trust is currently trading on a discount of 9.8 per cent – among the highest in the IT Global Emerging Market sector.
If investors want to maintain their exposure to the Aberdeen and First State teams, they will have to look beyond this sector.
In IT Asia Pacific excluding Japan, the long-term performance tables are dominated by Tulloch’s
Scottish Oriental Smaller Companies portfolio, as well as the Aberdeen Asian Smaller Companies Investment Trust
, which is headed up by the highly rated Hugh Young.
Young’s portfolio has a superior record over three, five and 10 years and is also less volatile.
Despite its small cap focus, it is also the least volatile portfolio in its sector over a 10-year period. Scottish Oriental Smaller Companies, which as its name suggests also focuses further down the market-cap spectrum, is the second least volatile.
Both trusts use the MSCI AC Asia Pacific ex Japan index as their benchmark.
Performance of trusts and index
Source: FE Analytics
||1-yr returns (%)
||3-yr returns (%)
||5-yr returns (%)
||10-yr returns (%)
|Aberdeen Asian Smaller Companies Investment Trust
|Scottish Oriental Smaller Companies
|MSCI AC Asia Pacific ex Japan TR in GB
With a discount of 8.9 per cent, Tulloch’s trust is perhaps more appealing for investors who expect the markets to pick up. Aberdeen Asian Smaller Companies is on a discount of 1.6 per cent.
For more traditional Asia Pacific portfolios, the Aberdeen New Dawn Investment Trust and Edinburgh Dragon Trust are worthy options. Both are also headed up by Young, but unlike the Asian Smaller Companies portfolio, these invest across the market-cap spectrum.
The Edinburgh Dragon Trust
invests principally in stocks, while the Aberdeen New Dawn Investment Trust can take significant positions in other collectives; the Aberdeen Global Indian Equity
fund, for example, is its biggest holding, with a weighting of 10.6 per cent.
The Aberdeen Asian Income trust, which was only launched in December 2005, is another attractive option, particularly for investors looking for a combination of both capital growth and income. Since launch, it has delivered 127.66 per cent, outperforming its benchmark by 50.13 per cent, with significantly less volatility.
Performance of trust vs index since launch
Source: FE Analytics
With a one-year historic yield of 3.77 per cent, it is also one of the highest-yielding trusts of its kind.
It is one of only two trusts in the IT Asia Pacific ex Japan sector that is currently trading on a premium.