A fund from one of the two groups tops the performance tables of the IMA Asia Pacific ex Japan sector over every significant time period.
For example, the five crown-rated Aberdeen Asian Smaller Companies is the best-performing fund in the sector over three and five years and FE Alpha Manager Angus Tulloch’s First State Asia Pacific is number-one over 10.
Portfolios from the two wealth managers litter the top-quartile over one, three, five and 10 years.
However, their dominance could provide retail investors with a real headache.
Aberdeen’s chief executive officer says the increased standard initial charge on its global emerging market equity funds is likely to be applied to its Asia Pacific funds as well due to similar levels of demand.
First State has already soft closed its Asia Pacific Sustainability fund and is attempting to slow inflows into its Asia Pacific Leaders fund in order to protect current investors’ interests.
This means the choice available to retail investors looking for an OEIC or unit trust in the sector could be drastically reduced.
There are still some decent options, especially for investors who are looking for yield. Newton Asian Income, Schroder Asian Income and L&G Asian Income have all been top quartile over one, three and five years and have a headline yield of above 3.5 per cent to boot.
However, there is another alternative.
While FE Trustnet has already highlighted the dominance of investment trusts over their open-ended rivals, this is especially the case in the Asia Pacific ex Japan sectors.
Although the past is no guide to future performance, closed-ended funds from the IT Asia Pacific ex Japanese Equities sectors tend to perform better than funds in the equivalent IMA sectors over all significant time frames – including the table-topping open-ended funds from Aberdeen and First State .
Rob Gleeson, head of FE Research, says that because a number of the top-performing open-ended funds in the sector are reaching capacity, he is considering including investment trusts on the FE Select 100 list.
When combing the two sectors, the four best-performing portfolios are all investment trusts. The top-ranking trust over that time is star manager Hugh Young’s Aberdeen Asian Smaller Companies Investment Trust, with returns of 971.31 per cent.
Although it invests in the smaller cap end of the market, it has beaten the First State Asia Pacific fund – the best open-ended portfolio over that time – by 515.28 percentage points.
Performance of funds over 10yrs
Source: FE Analytics
The Aberdeen Asian Smaller Companies Investment Trust is one of the more obvious alternatives for investors who had Aberdeen’s Asian Smaller Companies fund on their shopping list, as it has performed well over all significant timeframes.
The investment company is the best-performing Asia Pacific ex Japan portfolio over five and three years and the second-best performer over one year.
It has a total expense ratio (TER) of 1.51 per cent but due to its high performance it has attracted a lot of investor interest and is now trading on a 3.4 per cent premium to its NAV.
Another top-performing trust in the region is the Scottish Oriental Smaller Companies Trust.
It is the second-best performing portfolio in both sectors over three, five and 10 years. It is also suitable for investors concerned about premiums, as it is on a 0.6 per cent discount.
Both of the trusts that have been highlighted focus primarily on small caps, which is a riskier area of the already volatile emerging markets sector.
For investors looking for a large cap biased investment trust, the five crown-rated Schroder Oriental Income is another top-performing closed-ended portfolio.
The Guernsey-domiciled trust, managed by Matthew Dobbs, has outperformed all open-ended large cap Asia Pacific funds over three and five years.
Dobbs’ trust has returned 178.14 per cent since its launch in July 2005 while its benchmark – the MSCI AC Asia Pacific ex Japan index – has returned 132.07 per cent. However, the trust has been more volatile than its benchmark.
Performance of fund vs index since July 2005
Source: FE Analytics
The trust is yielding 3.34 per cent. Dobbs’ largest regional weighting is to Australia, at 26.1 per cent of AUM. Hong Kong and Singapore make up 17.5 per cent and 16.7 per cent respectively.
The investment trust operates 7 per cent gearing – borrowing to enhance performance – and is trading on a 4.5 per cent premium to its NAV. It has ongoing charges of 0.95 per cent but does implement a performance fee.
