Bestinvest’s dog funds: Emerging markets
Investing in the world’s fastest-growing regions is no guarantee against holding a dud fund, as new research shows.
By Mark Smith, Senior Reporter, FE Trustnet
Wednesday July 25, 2012
The aim of Bestinvest’s biannual Spot the Dog report is to help investors identify if they are in failing funds and to put pressure on the asset managers to address the root causes of the underperformance.
While the IMA’s emerging market sectors have far fewer dogs than the saturated UK markets, there are still a number of popular products that have found their way onto the list.
Global Emerging Markets
At the previous rebalancing of the Spot the Dog report six months ago, Bestinvest was pleased to report that not a single fund in the IMA Global Emerging Markets sector registered the requisite consecutive three-year underperformance to qualify as a “dog”.
This year, however, is a different story: three well-known funds have found themselves on the list.
IM Hexam Global Emerging Markets
has suffered the worst performance, losing investors 15.57 per cent over the last three years.
Managers Bryan Collings
and Grant Shotter
have a particularly aggressive style, expressing strong regional views through a high-conviction portfolio.
During a period characterised by a pull-back in emerging market economic growth, strategies focused on capital preservation have fared much better.
Performance of funds vs sector and index over 3-yrs
Source: FE Analytics
Dr Mark Mobius’
£19.1m Templeton Global Emerging Markets portfolio has also disappointed in recent years. Investors in the manager's top-performing investment trust will be particularly surprised by the relative weakness of the open-ended fund.
The final fund to make the list is SWIP Emerging Markets
. While it escaped in the previous rebalancing, it is a repeat offender, having failed to recover from the loss of key figures in its emerging markets team two years ago, according to Bestinvest.
At the other end of the spectrum, Bestinvest’s “best in breed” in the Global Emerging Markets sector are the top-performing Aberdeen Emerging Markets
and First State Global Emerging Markets Leaders
Out of 54 funds with a long enough track record in the Asia Pacific ex Japan sector, six find themselves on the list of dogs.
"The mangiest of the mutts has to be Marlborough Far East Growth, a fund which is quickly becoming a regular in Spot the Dog," said the Bestinvest report.
"Despite proving resilient back in 2008, the manager has been unable to capitalise on the recovery and has struggled to navigate the treacherous investment landscape of the last few years."
Our data shows that over the last three years the fund, managed by Christopher Wong
, has returned just 6.45 per cent compared with 29.66 per cent from the average fund in the sector.
F&C Pacific Growth
hasn’t fared much better, with a return of 6.75 per cent over the same period.
Bestinvest says that while the fund has appeared in the report for the last two years, F&C has made three manager changes during this time in a bid to reverse the underperformance.
Joining these dog funds are Threadneedle Asia
and Henderson Asia Pacific Capital Growth
, as well as two China-focused portfolios: HSBC Chinese Equity and Premier China Enterprise