Investors who buy into cyclical or volatile markets for the extreme long-term and are able to hold on through the rough patches are likely to come out the other side with healthy gains.
The following funds fit this profile, offering strong growth potential to anyone who is able to stomach the likely volatility.
First State Asia Pacific Leaders
Whitechurch’s Ben Willis (pictured below) says investors should look to the Asia Pacific region if they want a high-growth play for the long-term.
"If an investor has a long time horizon – and can stomach the volatility – we would look to the Asia Pacific, more specifically First State Asia Pacific Leaders," he said.
| Name | First State Asia Pacific Leaders |
|---|---|
| Size | £7bn |
| Min Investment | £1,000 |
| TER | 1.55% |
| Yield | 0.81% |
| Manager | FE Alpha Managers Angus Tulloch and Alistair Thompson |
| FE Crown Rating | 5 Crowns |
Source: FE Analytics
"The Asia Pacific countries are not hampered by the same debt issues; they had their problems during the 'Asia tiger crisis' of the late 1990s."
"Their domestic consumption, the aspiration of their middle class, and incredibly strong demographics mean they will be the engine that drives world growth in the future."
"It is definitely the region we want exposure to in the long run," he added.
The five crown-rated, £6.9bn First State Asia Pacific Leaders fund is a top-quartile performer in the IMA Asia Pacific ex Japan sector over one, three and five years.
According to FE Analytics, it has returned 333.5 per cent over the last half-decade, compared with 231.5 and 216.96 per cent from its MSCI AC Asia Pacific ex Japan benchmark and sector, respectively.
Performance of fund vs sector and index since Dec 2003
Source: FE Analytics
The fund has been run by the FE Alpha Manager duo of Angus Tulloch and Alistair Thompson since its launch in December 2003.
It has been considerably less volatile than the sector and index over this time.
Newton Asian Income
"We also like the income theme in the region, so one of our core holdings is Newton Asian Income," Willis added.
"It is another fund you can put your money into and forget about it for a few years."
| Name | Newton Asian Income |
|---|---|
| Size | £3.4bn |
| Min Investment | £1,000 |
| TER | 1.66% |
| Yield | 4.17% |
| Manager | Jason Pidcock and Caroline Keen |
| FE Crown Rating | 5 Crowns |
Source: FE Analytics
Jason Pidcock’s five crown-rated Newton Asian Income fund is one of the highest-yielding emerging market portfolios available to UK investors, with a payout of 4.17 per cent.
It has a total of £3.4bn in assets under management.
Newton Asian Income is the second best-performing fund in the IMA Asia Pacific ex Japan sector over the last five years, with returns of 117.38 per cent.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
It has also considerably outperformed its FTSE All World Asia Pacific ex Japan benchmark over this time.
Newton Asian Income’s largest sector weighting is to financials, which make up 29.05 per cent of the portfolio.
Worldwide Healthcare Trust
Andrew Merricks, head of investments at Skerritt Consultants, says investors who want a more sector-driven fund should consider the Worldwide Healthcare Trust.
"Instead of getting purely healthcare exposure, investors are getting a mix of pharmaceutical companies and biotech companies, plus diversification around the world," he explained. "The trust is managed by the healthcare specialist Orbimed."
"People don’t just stop getting ill because there is a recession on. So I think it is a very good place to put your money in the long-run."
| Name | Worldwide Healthcare Trust |
|---|---|
| Size | £405.5m |
| Ongoing charges | 1.08% |
| TER | 1.10% |
| Discount | 7.60% |
| Manager | Orbimed Capital and Samuel D Isaly |
| FE Crown Rating | 3 Crowns |
Source: FE Analytics
Over the last 10 years, the Worldwide Healthcare Trust has returned 231.12 per cent while its benchmark – the MSCI World Healthcare index – has returned 140.63 per cent.
Performance of fund vs index over 10yrs
Source: FE Analytics
The trust counts multi-national pharmaceutical companies such as Roche Holdings and Sanofi as top-10 holdings. It is geared at 3 per cent and is currently trading on a 6.78 per cent discount.
Schroder ISF Asian Total Return
Merricks agrees with Willis about the Asian growth story, but prefers to use the Schroder ISF Asian Total Return fund to gain access to it.
"For investors willing to take risk over the longer term, I think Asia always looks like a fairly good shout," he said. "A lower-risk way to access the Asian growth story is Schroder Asian Return."
"I like it because it is effectively investing in Asia with the handbrake on."
The $2.7bn, five crown-rated Schroder ISF Asian Total Return fund has beaten the MSCI AC Asia Pacific ex Japan index over one- and three-year periods.
| Name | Schroder ISF Asian Total Return |
|---|---|
| Size | $2bn |
| Min Investment | £1,000 |
| TER | 2.00% |
| Manager | FE Alpha Manager Robin Parbrook and King Fuei Lee |
| FE Crown Rating | 5 Crowns |
Source: FE Analytics
It is currently run by FE Alpha Manager Robin Parbrook. Since the fund’s launch in July 2008 it has returned 137.28 per cent, nearly doubling the returns of its benchmark.
Performance of fund vs index since July 2008
Source: FE Analytics
The fund has a considerably lower annualised volatility than the index over this period.
Aberdeen Global Asian Smaller Companies
Merricks thinks that the five crown-rated Aberdeen Global Asian Smaller Companies fund is a good match for investors looking to take even more risk within the region.
"Aberdeen Asian Smaller Companies is a very good fund. It is ideal for investors who want long-term growth, though of course it could prove to be quite volatile."
"Investors can access it in two ways, because there is both a unit trust and an investment trust."
| Name | Aberdeen Global Asian Smaller Companies |
|---|---|
| Size | $3.9bn |
| Min Investment | £1,500 |
| TER | 2.06% |
| Manager | Asian Equities team |
| FE Crown Rating | 5 Crowns |
Source: FE Analytics
Aberdeen Global Asian Smaller Companies is by far the standout performer in the IMA Asia Pacific ex Japan sector in recent times. It has been the highest returning fund in the sector over one, three and five years.
The five crown-rated fund – which has $3.9bn in assets under management – has returned 153.55 per cent over five years. This is treble the returns of the IMA Asia Pacific ex Japan sector and its MSCI AC Asia Pacific ex Japan Small Cap benchmark index over this time.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Aberdeen Asian Smaller Companies’ largest regional weighting is in Hong Kong, with 18.2 per cent of the portfolio held in Cantonese-listed companies.