Many investors consider investing offshore to be too dangerous and complicated, but this is not the case, says Mark Dampier, head of research at Hargreaves Lansdown.
"I don’t have a problem with investing in offshore funds," he said. "I just look at the fund manager and decide whether we like them."
"Years ago, offshore was considered scary because there had been various scandals. But if it’s a large, well-known company that is established over here, then it’s worth looking at."
"Quite often, funds are offshore because they need to sell into European markets and need to be offshore to do so."
"But from a marketing point of view, unless you are in the UK, you don’t see it. There’s no visibility to these funds, even if they’ve done very well."
First State China Growth
This $4.62bn fund, which has five FE crowns, is still available to investors even though the onshore First State Greater China Growth portfolio has been soft-closed.
First State Greater China Growth has made 85.01 per cent over five years, double the MSCI Golden Dragon benchmark’s returns of 42.83 per cent, but now requires a 4 per cent initial charge for new investors.
However, anyone who wants access to FE Alpha Manager Martin Lau’s expertise in the region can still buy his First State China Growth fund.
Over the past 10 years, Lau has made 864.28 per cent while the fund's MSCI China benchmark has risen by 510.7 per cent.
Over five years it has doubled the returns of the index, making 67.7 per cent, while the benchmark is up 34.31 per cent.
Data from FE Analytics shows that Lau has achieved these returns with a volatility substantially below that of the benchmark.
Over five years, the fund has an annualised volatility of 20.87 per cent while the figure for the MSCI China index is 28.22 per cent.
Invesco Pan European High Income
This €208.2m Luxembourg-domiciled fund is run by Paul Causer, Paul Read and Stephanie Butcher – the same team behind the onshore Invesco European High Income fund.
Over five years it has made 67.66 per cent through investing in bonds with a small weighting to shares.
Over three years it has made 39.24 per cent, while the onshore fund is up 27.13 per cent, according to data from FE Analytics.
In both cases the figures are the best out of the 100 funds in the Offshore FSA Regulated Mixed Asset Cautious sector.
Performance of funds over 3yrs
Source: FE Analytics
The make-up of the portfolios is very different; the offshore one has its largest position – 19.8 per cent of AUM – in German government bonds.
The managers have increased their weighting to equities up to 16 per cent of the portfolio in recent months, as the yields are better than those available on corporate bonds.
Causer and Read are known for finding value in European financials and there are large positions in Intesa Sanpaolo – an Italian bank – as well as Lloyds, UBS and Santander.
Although the £14.7m onshore fund has 19.96 per cent in German Bunds and large positions in bank debt, it has 34.29 per cent of its holdings in equities.
While the onshore fund is yielding a healthy 4.13 per cent, the offshore equivalent currently distributes 5.79 per cent.
The total expense ratio (TER) is higher on the offshore fund – 1.73 per cent compared with 1.59 per cent on the onshore equivalent.
Dampier says that higher charges have typically been a feature of offshore funds, which investors need to take into account.
First State Singapore & Malaysia Growth
Another First State fund to slip under the radar of many British investors is the $85.9m First State Singapore Malaysia & Growth, which data from FE Analytics shows has made 88.1 per cent over the past three years.
Performance of fund vs benchmark over 3yrs
Source: FE Analytics
This compares with the 48.76 per cent made by its bespoke benchmark – equally split between the MSCI Singapore and MSCI Malaysia indices. However, 66.3 per cent of the fund is invested in Singapore.
The fund benefitted from strong growth in its region last year, rising 39.99 per cent while its benchmark was up 17.28 per cent.
The fund has five FE Crowns and a TER of 1.73 per cent.
JF ASEAN
Dampier points out that many investors prefer to hold a south-east Asian fund with a broader mandate than the First State one, and JF ASEAN fits the bill.
The fund, which has five FE crowns, is up 61.85 per cent over three years, more than the 46.35 per cent made by the MSCI South East Asia benchmark and comparable to the 62.28 per cent made by the onshore Baring ASEAN Frontiers fund.
The $2bn fund, managed by Pauline Ng, Jenny Tan and Sarinee Sernsukskul, has a longer track record than its onshore rival.
It has made 487.92 per cent over the past decade; the benchmark’s history does not stretch that far back.
Singapore and Thailand together make up 59.4 per cent of the portfolio’s holdings, and Indonesia a further 19.8 per cent.
The minimum initial investment is $2,000 rather than the $5,000 on the Baring fund, although it is slightly more expensive at 1.6 per cent rather than 1.25 per cent.