Baillie Gifford and JP Morgan stand out as the fund groups that have produced top-returning Asian and emerging market funds with low-costs, according to data from FE Analytics.
For those who wish to invest in Asian and emerging markets, picking the right vehicle can often come down to cost.
Some investors chose to go with a passive index tracker to save on fees while others prefer to pay up for an active manager to try and navigate the rapidly evolving Asian and emerging markets.
Over the past five years, investors tracking the MSCI All Country Asia ex Japan index and the MSCI Emerging Markets index would have netted a 57.2% and 49.5% return respectively.
Performance of MSCI AC Asia ex Japan and MSCI Emerging Markets over 5yrs
Source: FE Analytics
However, there are a few actively managed funds in Asia over the past five years that have managed to deliver top-ranked returns while also charging sector-beating low ongoing charges figures (OCF).
Out of the funds with top-ranked five-year performance, there were 23 with charges below their sector average (ranked second quartile).
There were also 20 funds with charges above their sector average (ranked third quartile) and seven which had high ongoing charges (putting them at the bottom quartile of their sector).
Of the 50 funds with a five-year track record across both sectors, just four funds delivered top-ranked returns at a top-quartile low cost.
The first fund was the Baillie Gifford Pacific fund, which delivered 169.6% over the past five years. This is almost triple the return of the MSCI AC Asia ex Japan index and makes it the highest performing strategy in its sector for the period.
Performance of fund versus sector over 5yrs
Source: FE Analytics
Despite its top-quartile, low ongoing charges figure of 0.71%, the fund delivered returns of almost 50 percentage points above that of the second highest returning fund in the sector – the PGIM Jennison Emerging Markets Equity fund which delivered 133.3% over the period.
Baillie Gifford Pacific is managed by FE fundinfo Alpha Manager Roderick Snell, alongside Ben Durrant, who recently said he thinks Asia is a stock-pickers ‘dream’ market.
The managers employ Baillie Gifford’s long-term investing philosophy, taking a buy-and-hold approach to investing in Asian companies with strong growth prospects.
Its largest conviction position is in SEA Limited, the Singaporean company that started off in game publishing but has since evolved into a technology conglomerate.
The company is a large overweight for the fund – at a 7.6% holding – whereas it is absent from the top-10 of the MSCI AC Asia ex Japan index.
Despite this, co-manager Durrant believes it will become Southeast Asia’s first trillion-dollar company.
The second fund that had top-ranked returns and low costs, was the JPM Asia Growth fund, which delivered 105.7%, with an OCF of 0.82%.
Performance of fund versus sector over 5yrs
Source: FE Analytics
The fund is managed by JP Morgan Asset Management’s Mark Davids and Joanna Kwok. They take a high-conviction, concentrated approach focused on high-quality, growing companies.
The fund’s biggest overweight positions are in the companies behind the world’s largest semiconductor foundries.
It has a 9.6% position in Taiwan Semiconductor versus 7.9% in the index, and a 7.4% position in Samsung Electronics versus 4.3% in the index.
The fund is still largely overweight to the Chinese technology giants Alibaba and Tencent, which are both down significantly from their highs in early 2021.
Both stocks have suffered from fines and a widespread regulatory crackdown from the Chinese authorities.
This seems to have affected the fund’s recent performance. Although the fund is in the top-quartile over the past five years, it has fallen to the bottom quartile for performance over the past year.
When it comes to global emerging markets, there were only two funds that delivered top-ranked returns and low costs. Both were Baillie Gifford funds.
These were the Baillie Gifford Emerging Markets Leading Companies fund, which returned 93.3% over the past five years, and the Baillie Gifford Emerging Markets Growth fund, which returned 82.4%. Both have an OCF of 0.76%.
Performance of funds versus sector over 5yrs
Source: FE Analytics
Both funds take a slightly different approach to investing in emerging markets, shunning steady predictable growth stocks in favour of those where there is a chance of outsized returns.
Baillie Gifford Emerging Markets Leading Companies is run by FE fundinfo Alpha Managers Will Sutcliffe, Roderick Snell and Sophie Earnshaw, whereas Baillie Gifford Emerging Growth is run by Mike Gush, Andrew Stobart and Ben Durrant.
Despite having different managers, both funds follow a similar approach of investing in companies where the outcomes are less certain, but the potential returns are significant.