FE Trustnet recently showed that few global emerging markets funds have managed to significantly outperform their benchmark, but our data shows Asian funds do better in that regard.
Out of 85 funds in the IMA Asia Pacific ex Japan sector, 38 per cent have added positive alpha to their benchmark on an annualised basis over the past five years, according to data from FE Analytics.
This compares against 11 out of the 71 funds in the IMA Global Emerging Markets sector: just 15 per cent.
The fund to have added the most alpha to its benchmark over the past five years in the IMA Asia Pacific ex Japan sector is Aberdeen Global Asian Smaller Companies.
The fund, which has five FE Crowns, has added alpha worth 16.02 per cent over that time.
Impressively, it also has the lowest annualised volatility of any fund in the sector: 15.92 per cent.
This means it is less volatile than all the large cap focused funds in the sector, which is striking given the reputation of smaller companies funds as more volatile.
The fund has the highest returns of any in the sector over that period, having made 160.75 per cent against the sector average of 43.31 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
This means it also has the best risk-adjusted returns measured by the Sharpe ratio.
There are no other exclusively smaller companies funds in the sector with a track record that long.
JOHCM Asia ex Japan Small and Mid Cap was only launched in September 2011, and amounts to only £8.8m in size.
With a track record so short it is of questionable use to calculate and compare the alpha with the Aberdeen fund.
Annualised alpha and volatility of Asia Pacific ex Japan funds
| Name | Alpha (%) |
Volatility (%) | Rank |
|---|---|---|---|
| Aberdeen Global Asian Smaller Companies |
15.93 | 15.92 | 1 |
| Newton Asian Income | 9.88 | 18.47 | 4 |
| First State Asia Pacific Sustainability | 8.89 | 17.03 | 2 |
| Schroder Asian Alpha Plus | 7.68 | 21.78 | 16 |
| First State Asia Pacific | 6.49 | 17.62 | 3 |
| Schroder Asian Income | 6.22 | 18.89 | 6 |
| First State Asia Pacific Leaders | 5.58 | 18.52 | 5 |
| Aberdeen Asia Pacific | 4.37 | 19.08 | 7 |
| L&G Asian Income | 4.37 | 19.76 | 9 |
| Aberdeen Global Asia Pacific Equity |
4.18 | 19.19 | 8 |
Source: FE Analytics
The fund with the second-best record of adding alpha to its benchmark over that time is the Newton Asian Income fund, at 9.88 per cent.
Jason Pidcock’s £3.9bn fund, which has five FE Crowns, has been one of the most popular funds on the market in recent years, with its mixture of emerging markets exposure and yield proving popular with investors.
It has managed to outperform the index despite investing in the more defensive companies that typically provide dividends.
There are a number of other funds with a similar remit to have added significant amounts of alpha over the time: Schroder Asian Income has added alpha worth 7.68 per cent to its benchmark while L&G Asian Income has added 4.37 per cent. Both are top-quartile figures.
Schroder Asian Alpha Plus has the fourth-best figure in the sector, although it has the highest volatility of the top-10 funds.
Managed by Matthew Dobbs, the £493m fund has made 86.29 per cent over the past five years while the MSCI AC Far East benchmark has made just 34.34 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
The IMA Asia Pacific inc Japan sector contains far fewer funds, although four out of the seven – or 57 per cent – of the funds with a five-year track record have produced positive alpha over five years.
Being in Japan has helped funds over the past year, and investors who think the current monetary policy will continue to benefit the country might like to consider switching into one of the portfolios that invests in it.
Aberdeen Asia Pacific & Japan has the best record over the past five years, having added alpha worth 5.24 per cent to its benchmark over that time.
It is also the least volatile of any fund in the sector, with an annualised figure of 17.51 per cent.
Annualised alpha and volatility of Asia Pacific inc Japan funds
| Fund | 5yr alpha (%) | Volatility (%) |
|---|---|---|
| Aberdeen Asia Pacific & Japan |
5.24 | 17.51 |
| SJP Far East | 2.88 | 17.68 |
| Smith & Williamson Far Eastern Growth | 2.36 | 19.15 |
| Invesco Perp Pacific | 2.02 | 19.9 |
| Baillie Gifford Developed Asia Pacific | -1.51 | 20.9 |
| JPM Pacific Equity | -1.53 | 19.49 |
| GAM Star Asia Pacific Equity | -4.58 | 20.69 |
Source: FE Analytics
SJP Far East has the second-best figure in the sector, at 2.88 per cent.
The £423m fund is run by FE Alpha Manager Hugh Young, who also heads the team on the Aberdeen fund.
Smith & Williamson Far Eastern Growth and Invesco Perpetual Pacific are the two others to have added positive alpha to their benchmark over that time.
The sector has returned 44.11 per cent over the past five years, while the Smith & Williamson fund has made 59.62 per cent and the Invesco fund has made 61.9 per cent.
Performance of funds vs sector over 5yrs
Source: FE Analytics
Smith & Williamson Far Eastern Growth is a £27m fund. It has been run by Jane Andrews since 1996, while Stuart Parks has managed the Invesco fund since 2000.
