Sixty-seven funds of funds count the five crown-rated portfolio as a top-10 holding. The £7.9bn fund is run by the FE Alpha Manager duo of Angus Tulloch and Alistair Thompson.
Most popular emerging Asia funds
Source: FE Analytics
FE Alpha Manager Toby Ricketts is clearly a fan of Tulloch and Thompson’s fund. He counts it as a top-10 holding in his Premier Sentinel Enterprise Portfolio, Margetts Opes Growth, Margetts Select Strategy and Margetts Venture Strategy funds.
Bill McQuaker – who is also an FE Alpha Manager – holds it in his Henderson Multi Manager Distribution and Henderson Multi Manager Income & Growth funds.
First State Asia Pacific Leaders is a top-quartile performer over one, three and five years.
Since launch in December 2003, it has made 333.47 per cent. The sector and index have gained 216.29 per cent and 231.66 respectively.
Performance of fund vs sector and index since launch
Source: FE Analytics
The fund requires a minimum investment of £1,000 and has an ongoing charges figure (OCF) of 1.55 per cent.
The study also revealed the popularity of emerging market tracker funds among open-ended managers.
BlackRock CIF Pacific ex Japan Equity Tracker, Vanguard Pacific ex Japan Stock Index and HSBC Pacific Index all made it into the top-10.
While none of the trackers beat the First State portfolio, they have all consistently outperformed the sector over one, three and five years; this is with the exception of the Vanguard tracker, which has not yet reached its five-year anniversary.
Performance of funds vs sector
| Name | 1 yr (%) | 3 yrs (%) | 5 yrs (%) |
|---|---|---|---|
| Vanguard Pacific ex Japan Stock Index | 24.67 | 29.56 | N/A |
| BlackRock CIF Pacific ex Japan Equity tracker | 16.93 | 26.22 | 65.54 |
| HSBC Pacific Index | 17.17 | 24.81 | 60.2 |
| IMA Asia Pacific ex Japan | 15.17 | 19.96 | 57.67 |
Source: FE Analytics
Hargreaves Lansdown’s Richard Troue says there is a case for index tracking funds in emerging Asia, but he believes investors would likely be better off sticking with active managers.
"It’s still an area where active managers can add a lot of value through stockpicking and individual company research," he said.
Troue says that unlike the US, where active managers have struggled to consistently outperform the heavily researched index, emerging Asia is still riddled with macro-issues that can cause tremors in the underlying index – something active managers can move to avoid.
"What you still find in emerging Asia is a lot of the biggest companies out there can be quite large, government-owned companies so they are subject to the influence of policies. But since they are the biggest companies, they will be part of the index."
"Active managers are free to hold less in those companies if they want to or avoid them altogether," he said.
Troue says that while corporate governance issues have improved in the region, they are still not quite up to western standards.
"Active managers can make a judgment and that puts them in a better position because certain companies will definitely be held in a tracker fund or passive fund."
"Still, they have a place for broad exposure and there’s an argument to holding a blend of actively and passively managed funds," he added.
Troue says investors are in a safe pair of hands with Tulloch (pictured) and Aberdeen’s Hugh Young, who look for strong, quality companies in a region that is still more volatile than developed markets.
Bestinvest’s Jason Hollands agrees that active management is the best route to take in emerging Asia and Asia generally.
"The area is less appropriate for indexing exposure. Index funds work very well in liquid, efficient markets like the US, but in emerging Asia there is room to add value and doing your own research pays dividends," he said.
"We don’t use [trackers in Asia] because we can identify fund managers than can beat the index."
Adam Laird, passive investment manager at Hargreaves Lansdown, says it makes sense for investors who are looking for broad exposure to consider passive funds.
He adds that ETFs are another low-cost way to gain access to the region, but they are often looked to for more specialised exposure to a single country – such as Thailand – to add an extra kick to a portfolio.